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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 /FEE REQUIRED/
For the fiscal year ended December 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 /NO FEE REQUIRED/
For the transition period from _____________________ to ___________________
Commission file number 33-28409
SILGAN HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
Delaware 06-1269834
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(State of incorporation) (I.R.S. Employer Identification No.)
4 Landmark Square, Stamford, Connecticut 06901
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 975-7110
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
None of the registrant's voting stock was held by nonaffiliates as of March
15, 1994.
As of March 15, 1994, the number of shares outstanding of each of the
registrant's classes of common stock is as follows:
Classes of shares of common stock Number of shares
outstanding, $0.01 par value outstanding
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Class A 417,500
Class B 667,500
Class C 50,000
Documents Incorporated by Reference: None
TABLE OF CONTENTS
Page
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PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security Holders . . 13
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . 14
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 17
Item 8. Financial Statements and Supplementary Data . . . . . . 25
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . 25
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Item 10. Directors and Executive Officers of the Registrant . . . 26
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . 30
Item 12. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . . 36
Item 13. Certain Relationships and Related Transactions. . . . . 44
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Item 14. Exhibits, Financial Statements, Schedules, and Reports on
Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . 47
PART I.
Item 1. Business
General
Silgan Holdings Inc. ("Holdings," and, together with its subsidiaries,
the "Company") is a Delaware corporation organized in April 1989, that, in
June 1989, through certain mergers acquired all of the outstanding common
stock of Silgan Corporation ("Silgan"). Holdings' principal asset is all of
the outstanding capital stock of Silgan. Prior to June 30, 1989, Holdings
did not engage in any business. Silgan is a Delaware corporation formed in
August 1987 as a holding company to acquire interests in various packaging
manufacturers. See "Company History" below.
The Company is a major manufacturer and seller of a broad range of steel
and aluminum containers for the food and pet food markets and plastic
containers for the personal care, food, pharmaceutical and household markets
in the United States. In 1993, the Company had net sales of $645 million.
On December 21, 1993, Silgan's wholly owned subsidiary, Silgan
Containers Corporation ("Containers"), acquired from Del Monte Corporation
("Del Monte") substantially all of the fixed assets and certain working
capital of Del Monte's container manufacturing business in the United States
("DM Can") for approximately $73 million. See "Company History" below. In
connection therewith, Containers and Del Monte entered into a ten-year supply
agreement (the "DM Supply Agreement") pursuant to which Containers supplies
substantially all of the metal container requirements of Del Monte. On a pro
forma basis giving effect to the acquisition of DM Can, in 1993 the Company
would have had net sales of $818 million. See "Sales and Marketing" below.
Management believes that the Company is the largest food can producer in
the United States (based on pro forma unit sales after giving effect to the
acquisition of DM Can) and one of the largest producers in the United States
of high density polyethylene ("HDPE") containers for the personal care market
and a major producer of custom polyethylene terephthalate ("PET") products
for the personal care and food markets. Silgan has experienced significant
growth since its inception in 1987 as a result of its acquisitions and
related increased market position.
Management estimates that Containers is currently the nation's largest
manufacturer of metal food containers and that in 1993 Containers sold
approximately 27% of all metal food containers sold in the United States by
non-captive manufacturers (manufacturers of containers not owned by a user of
containers) and approximately 16% of all metal food containers sold in the
United States, in each case based on unit sales. On a pro forma basis giving
effect to the acquisition of DM Can, Containers would have sold approximately
34% of all metal food containers sold in the United States by non-captive
manufacturers and approximately 22% of all metal food containers sold in the
United States. Although the food can industry in the United States is
relatively stable and mature in terms of unit sales growth, Containers, on a
pro forma basis after giving effect to the acquisition of DM Can, has
realized compound annual unit sales growth in excess of 12% since 1987.
Types of containers manufactured include those for vegetables, fruit, pet
food, tomato based products, evaporated milk and infant formula. Containers
has agreements (the "Nestle' Supply Agreements") with Nestle' Food Company
("Nestle'"), formerly known as The Carnation Company ("Carnation"), pursuant
to which Containers supplies substantially all of the can requirements of the
former Carnation operations of Nestle'. In addition to the Nestle' Supply
Agreements and the DM Supply Agreement, Containers has other long-term supply
arrangements with other customers. The Company estimates that in excess of
80% of Containers' sales in 1994 will be pursuant to long-term supply
arrangements. See "Sales and Marketing" below.
Management believes that Silgan's wholly owned subsidiary, Silgan
Plastics Corporation ("Plastics"), is one of the leading manufacturers of
plastic containers sold in the United States for the personal care, household
and pharmaceutical markets served by the Company. Plastic containers
manufactured by Plastics include personal care containers for shampoos,
conditioners, hand creams, lotions and cosmetics, household containers for
light detergent liquids, scouring cleaners and specialty cleaning agents and
pharmaceutical containers for tablets, laxatives and eye cleaning solutions.
Plastics is also one of the leading manufacturers of PET containers sold in
the United States for applications other than soft drinks. Plastics
manufactures custom PET medicinal and health care product containers (such as
mouthwash bottles), custom narrow-neck food product containers (such as salad
dressing bottles), custom wide-mouth food product containers (such as
mayonnaise and peanut butter containers) and custom non-soft drink beverage
product containers (such as juice, water and liquor bottles).
The Company's strategy is to continue to improve its market position and
profitability through focus on product quality, customer service, cost
efficiencies, strategic acquisitions and market share growth through
customers experiencing market share growth. At Containers, management has
focused on achieving operating cost advantages over its competitors,
primarily through low labor costs, low overhead, technologically advanced
manufacturing processes and by exploiting the favorable geographic locations
of its 22 can plants. Since its inception in 1987, Containers has invested
more than $82 million in its existing manufacturing facilities and has spent
approximately $66 million for the purchase of additional can manufacturing
assets. As a result of these efforts and management's focus on quality and
service, Containers has increased its overall share of the food can market by
approximately 100% in terms of unit sales, from a share of approximately 11%
in 1987 to a share of approximately 22% in 1993, on a pro forma basis giving
effect to the acquisition of DM Can.
Plastics has increased its market position primarily by strategic
acquisitions. From a sales base of $89 million in 1987, Plastics' sales
increased to $186 million in 1993, or 13% on a compound annual basis. While
many of Plastics' larger competitors employ technology oriented to large
bottles and long production runs, Plastics has focused on mid-sized,
extrusion blow-molded plastic containers requiring special decoration and
shorter production runs. Plastics emphasizes value-added fabrication of the
container, creative design and sophisticated decoration processes. Plastics
is also aggressively pursuing new markets for plastic containers, including
the post-consumer recycled ("PCR") resin segment of the market. Based upon
published information and management's experience in the industry, management
believes that PET custom containers are replacing glass containers for
products such as mouthwash, salad dressing, peanut butter and liquor.
Management also believes that Plastics is well positioned because of its
technologically advanced equipment to respond to opportunities for future
growth in the rigid plastic container market. Furthermore, to the extent
that mandatory recycling laws, customer preferences or manufacturing costs
result in increased demand for HDPE containers that are manufactured using
PCR resins, the Company believes that its proprietary equipment is
particularly well-suited for the production of such containers because of the
relatively low capital costs required to convert its equipment from the use
of virgin resins.
The Company is also engaged in the manufacture and sale of paper
containers primarily used by processors and packagers in the food industry.
Sales of paper containers in 1993 were approximately $13 million.
Products
The Company is engaged in the manufacture and sale of steel and aluminum
containers that are used primarily by processors and packagers in the food
and pet food industries. Types of containers manufactured include those for
vegetables, fruit, pet food, tomato based products, evaporated milk and
infant formula. The Company does not produce cans for use in the beer or
soft drink industries. Cans are produced in a variety of sizes, ranging in
diameter from 2-1/8 inches to 6-3/16 inches and in height from 1-7/16 inches
to 7 inches.
The Company is also engaged in the manufacture and sale of plastic
containers primarily used in the personal care, food, beverage (other than
carbonated soft drinks), household and pharmaceutical container markets.
Plastic containers are produced by converting thermoplastic materials into
plastic containers ranging in size from 1/2 to 96 ounces. Emphasis is on
value-added fabrication of the container and the decoration process. The
Company designs and manufactures a wide range of containers for toiletries
and cosmetic products such as shampoos, hand creams and lotions. Because
toiletries and cosmetic products are characterized by short product life and
a demand for creative packaging, the containers manufactured for these
products generally have more sophisticated designs and decorations. Food and
beverage containers are designed and manufactured (generally to unique
specifications for a specific customer) to contain products such as
mouthwash, salad dressing, peanut butter, coffee, juice, water and liquor.
Household containers are designed and manufactured to contain light-duty
dishwasher and heavy-duty laundry detergents, bleach, polishes, specialty
cleaning agents, insecticides and liquid household products. Pharmaceutical
containers are designed and manufactured (either in a generic or in a
custom-made form) to contain tablets, solutions and similar products for the
ethical and over-the-counter markets.
Manufacturing and Production
The Company uses three basic processes to produce cans. The traditional
three-piece method requires three pieces of flat metal to form a cylindrical
body with a welded side seam, a bottom and a top. The Company uses a welding
process for the side seam of three-piece cans to achieve a superior seal.
High integrity of the side seam is further assured by the use of
sophisticated electronic weld monitors and organic coatings that are
thermally cured by induction and convection processes. The other two methods
of producing cans start by forming a shallow cup that is then formed into the
desired height using either the draw and iron process or the draw and redraw
process. Using the draw and redraw process, the Company manufactures steel
and aluminum two-piece cans, the height of which does not exceed the
diameter. For cans the height of which is greater than the diameter, the
Company also manufactures steel two-piece cans by using a drawing and ironing
process. Quality and stackability of such cans are comparable to that of the
shallow two-piece cans described above. Can bodies and ends are manufactured
from thin, high-strength aluminum alloys and steels by utilizing proprietary
tool and die designs and selected can making equipment. The Company's
manufacturing operations include cutting, coating, lithographing,
fabricating, assembling and packaging finished cans.
The Company utilizes two basic processes to produce plastic bottles. In
the blow molding process, pellets of plastic resin are heated and extruded
into a tube of plastic. A two-piece metal mold is then closed around the
plastic tube and high pressure air is blown into it causing a bottle to form
in the mold's shape. In the injection blow molding process, pellets of
plastic resin are heated and injected into a mold, forming a plastic tube.
The plastic tube is then blown into a bottle-shaped metal mold, creating a
plastic bottle.
The Company believes that its proprietary equipment for the production
of HDPE containers is particularly well-suited for the use of PCR resins
because of the relatively low capital costs required to convert its equipment
from the use of virgin resins.
The Company's decorating methods for its plastic products include (i)
silk screen decoration, which enables the application of one to six images in
multiple colors to the bottle, (ii) post-molding decoration, which uses paper
labels applied to the bottles with glue and (iii) pressure-sensitive
decoration, which applies a paper label to a post-molded bottle by pressing
against the bottle. The Company has state-of-the-art decorating equipment,
including, management believes, one of the largest sophisticated decorating
facilities in the Midwest, which allows the Company to custom-design new
products with short lead times.
As is the practice in the industry, most of the Company's can and
plastic container customers provide it with annual estimates of products and
quantities pursuant to which periodic commitments are given. Such estimates
enable the Company to effectively manage production and control working
capital requirements. At December 31, 1993, Containers had in excess of 80%
of its projected 1994 sales under long-term contracts. Plastics has written
purchase orders or contracts for containers with the majority of its
customers. In general, these purchase orders and contracts are for
containers made from proprietary molds and are for a duration of 2-5 years.
Both Containers and Plastics schedule their production to meet their
customers' requirements. Because the production time for the Company's
products is short, the backlog of customer orders in relation to sales is not
significant.
Raw Materials
The Company uses tin plated and chromium plated steel, aluminum, copper
wire, organic coatings, lining compound and inks in the manufacture and
decoration of its metal can products. The Company's steel and other material
requirements are supplied through purchase orders with suppliers with whom
the Company, through its predecessors, has long-term relationships or through
open market purchases. The Company has a contract to obtain the majority of
its requirements for aluminum at prices that are subject to adjustment based
on formulas and market conditions. Such contract expires in 1996. The
Company believes that it would be able to satisfy its requirements for
aluminum from other suppliers in the event of the loss of the current
supplier. The Company believes that it will be able to purchase sufficient
quantities of steel and aluminum can sheet for the foreseeable future.
The raw materials used by the Company for the manufacture of plastic
containers are primarily resins in pellet form such as PCR and virgin HDPE
and PET and, to a lesser extent, low density polyethylene, extrudable
polyester terephthalate, polyethylene terephthalate glycol, polypropylene,
polyvinyl chloride and medium density polyethylene. The Company's resin
requirements are acquired through a series of informal annual purchase orders
for specific quantities of resins with several suppliers of resins. The
price the Company pays to purchase resin is determined at the time of
purchase. The Company believes that it will be able to purchase sufficient
quantities of resin for the foreseeable future.
The Company does not believe that it is materially dependent upon any
single supplier for any of its raw materials and, based upon the existing
arrangements with suppliers discussed above, its current and anticipated
requirements and market conditions, the Company believes that it has made
adequate provisions for acquiring raw materials. Although increases in the
prices of raw materials have generally been passed along to the Company's
customers, the inability to do so in the future could have a significant
impact on the Company's operating margins. In addition, should any of its
suppliers fail to deliver under their arrangements, the Company would be
forced to purchase raw materials on the open market, and no assurances can be
given that it would be able to make such purchases at prices which would
allow it to remain competitive.
Sales and Marketing
The Company markets its products in most areas of the continental United
States primarily by a direct sales force through regional sales offices.
Because of the high cost of transporting empty containers, the Company
generally sells to customers within a 300 mile radius of its manufacturing
plants. See also "Competition" below.
In 1987, the Company, through Containers, and Nestle' entered into the
Nestle' Supply Agreements pursuant to which Containers has agreed to supply
Nestle' with, and Nestle' has agreed to purchase from Containers,
substantially all of the can requirements of the former Carnation operations
of Nestle' for a period of ten years, subject to certain conditions.
The Nestle' Supply Agreements provide for certain prices and specify
that such prices will be increased or decreased based upon cost change
formulas set forth therein. During the duration of the Nestle' Supply
Agreements, if Nestle' receives a competitive bid for any product supplied,
Containers has the right to match such bid with respect to the type and
volume of cans over the period of the competitive bid. In the event that
Containers chooses not to match a competitive bid, Nestle' may purchase cans
from the competitive bidder at the competitive bid price for the term of the
bid. The Nestle' Supply Agreements contain provisions that require
Containers to maintain certain levels of product quality, service and
delivery in order to retain the Nestle' business. In the event of a breach
of a particular Nestle' Supply Agreement, Nestle' may terminate such Nestle'
Supply Agreement but the other Nestle' Supply Agreements would remain in
effect.
Since 1990, Nestle' has requested that Containers match certain bids
received from other potential suppliers. Containers agreed to match such
bids (which resulted in minor margin impact) and continues to supply
substantially all of the can requirements of the former Carnation operations
of Nestle'. In the future, there can be no assurance that Containers will
choose to match any such bids or that, even if matched, such bids will be at
a level sufficient to allow Containers to maintain margins currently
received. Until any such bids are received by Nestle' and submitted to the
Company, the Company cannot predict the effect, if any, of such bids upon its
financial condition or results of operations. Significant reductions of
margins or the loss of significant unit volume under the Nestle' Supply
Agreements could, however, have a material adverse effect on the Company.
On December 21, 1993, Containers and Del Monte entered into the DM
Supply Agreement. Under the DM Supply Agreement, Del Monte has agreed to
purchase from Containers, and Containers has agreed to sell to Del Monte,
100% of Del Monte's annual requirements for metal containers to be used for
the packaging of food and beverages in the United States and not less than
65% of Del Monte's annual requirements of metal containers for the packaging
of food and beverages at Del Monte's Irapuato, Mexico facility, subject to
certain limited exceptions.
The DM Supply Agreement provides for certain prices for all metal
containers supplied by Containers to Del Monte thereunder and specifies that
such prices will be increased or decreased based upon specified cost change
formulas.
Under the DM Supply Agreement, after five years, Del Monte may, under
certain circumstances, receive proposals with terms more favorable than those
under the DM Supply Agreement from independent commercial can manufacturers
for the supply of containers of a type and quality similar to the metal
containers that Containers furnishes to Del Monte, which proposals shall be
for the remainder of the term of the DM Supply Agreement and for 100% of the
annual volume of containers at one or more of Del Monte's canneries.
Containers has the right to retain the business subject to the terms and
conditions of such competitive proposal.
The sale of metal containers to vegetable pack customers is seasonal and
monthly revenues increase during the months of June through October. As is
common in the packaging industry, the Company must build inventory and then
carry accounts receivable for some seasonal vegetable pack customers beyond
the end of the harvest season. Consistent with industry practice, such
customers may return unused containers. Historically, such returns have been
minimal.
As part of its marketing strategy, the Company has arrangements to sell
some of its plastic products to distributors, which in turn sell such
products primarily to small-size regional customers. Plastic containers sold
to distributors are manufactured by using generic molds with decoration,
color and neck finishes added to meet the distributors' individual
requirements. The distributors' warehouses and their sales personnel enable
the Company to market and inventory a wide range of such products to a
variety of customers.
In 1993, 1992 and 1991, metal containers accounted for approximately
69%, 68% and 64%, respectively, of the Company's total sales, and plastic
containers accounted for approximately 29%, 30% and 34%, respectively, of the
Company's total sales. On a pro forma basis after giving effect to the
acquisition of DM Can, metal and plastic containers in 1993 would have
accounted for approximately 76% and 23% of the Company's total sales,
respectively. The Company's total sales of paperboard cartons accounted for
approximately 2% of the Company's total sales in each of 1993, 1992 and 1991.
In 1993, 1992 and 1991, approximately 34%, 37% and 32%, respectively, of the
Company's sales were to Nestle'. On a pro forma basis after giving effect to
the acquisition of DM Can, approximately 27% of the Company's 1993 sales
would have been to Nestle' and 21% of the Company's 1993 sales would have
been to Del Monte. No other customer accounted for more than 10% of the
Company's total sales during such years.
Competition
The packaging industry is highly competitive. The Company competes in
this industry with other packaging manufacturers as well as fillers, food
processors and packers who manufacture containers for their own use and for
sale to others. The Company attempts to compete effectively through the
quality of its products, pricing and its ability to meet customer
requirements for delivery, performance and technical assistance. The Company
also pursues market niches such as the manufacture of easy-open ends and
special feature cans, which may differentiate the Company's products from its
competitors' products.
Management believes that the market for metal food containers is mature.
Some self-manufacturers have sold or closed can manufacturing operations and
entered into long-term supply agreements with the new owners or with
commercial can manufacturers. Of the commercial metal can manufacturers,
Crown Cork and Seal Company, Inc., American National Can Company and Ball
Corporation (through its Heekin Can operations) are the Company's most
significant competitors.
Although metal containers face continued competition from plastic, paper
and composite containers, management believes that metal containers are
superior to plastic and paper containers in industry sectors where the
contents are processed at high temperatures, where the contents are packaged
in large or institutional quantities (14 to 64 oz.) or where long-term
storage of the product is desirable. Such sectors include canned vegetables,
fruits, meats, juices, non-carbonated beverages and pet foods. These sectors
are the principal areas for which the Company manufactures its products.
Plastics competes with a number of large national producers of food,
beverage and household plastic container products, including Owens-Brockway
Plastics Products, a division of Owens-Illinois, Inc., Plastic Containers
Inc., Johnson Controls Inc., Constar Plastics Inc., a subsidiary of Crown
Cork and Seal Company, Inc., Graham Packaging Co. and Plastipak Packaging
Inc. In order to compete effectively in the constantly changing market for
plastic bottles, the Company must remain current with, and to some extent
anticipate innovations in, resin composition and applications and changes in
the manufacturing of plastic bottles.
Because of the high cost of transporting empty containers, the Company
generally sells to customers within a 300 mile radius of its manufacturing
plants. Strategically located existing plants give the Company an advantage
over competitors from other areas, and the Company would be disadvantaged by
the loss or relocation of a major customer. As of February 28, 1994, the
Company operated 35 manufacturing facilities, geographically dispersed
throughout the United States and Canada, that serve the distribution needs of
its customers.
Employees
As of December 31, 1993, the Company employed approximately 630 salaried
and 3,350 hourly employees on a full time basis, including 650 employees who
joined the Company on December 21, 1993 as a result of the acquisition of DM
Can. Approximately 60% of the Company's hourly plant employees are
represented by one of the following unions: (i) Sheet Metal Workers
International Association, (ii) International Association of Machinists and
Aerospace Workers, (iii) The International Brotherhood of Teamsters, (iv) The
United Steel Workers of America, (v) Industrial, Technical & Professional
Employees Union, (vi) The Glass, Molders, Pottery, Plastics and Allied
Workers International Union, (vii) The United Rubber, Cork and Plastic
Workers of America and (viii) Oil, Chemical & Atomic Workers International
Union.
The Company's labor contracts expire at various times between 1994 and
1998. Contracts covering approximately 14% of the Company's hourly employees
presently expire during 1994. The Company expects no significant changes in
its relations with these unions. Management believes that its relationship
with its employees is good.
Regulation
The Company is subject to federal, state and local environmental laws
and regulations. In general, these laws and regulations limit the discharge
of pollutants into the air and water and establish standards for the
treatment, storage, and disposal of solid and hazardous waste. The Company
believes that all of its facilities are either in compliance in all material
respects with all presently applicable environmental laws and regulations or
are operating in accordance with appropriate variances, delayed compliance
orders or similar arrangements. In the past, the Company inadvertently made
late filings with the federal Environmental Protection Agency under the
Emergency Planning and Community Right to Know Act ("EPCRA"). The Company is
currently in compliance in all material respects with EPCRA.
In addition to costs associated with regulatory compliance, the Company
may be held liable for alleged environmental damage associated with the past
disposal of hazardous substances. Generators of hazardous substances
disposed of at sites at which environmental problems are alleged to exist, as
well as the owners of those sites and certain other classes of persons, are
subject to claims under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA") regardless of fault or the
legality of the original disposal. Liability under CERCLA and under many
similar state statutes is joint and several, and, therefore, any responsible
party may be held liable for the entire cleanup cost at a particular site.
Other state statutes may impose proportionate rather than joint and several
liability. The federal Environmental Protection Agency or a state agency may
also issue orders requiring responsible parties to undertake removal or
remedial actions at certain sites. Pursuant to the agreement relating to the
acquisition in 1987 of the metal container manufacturing division of Nestle'
("Nestle' Can"), the Company has assumed liability for the past waste
disposal practices of Nestle' Can. The Company has received notice that it
is one of many potentially responsible parties (or similarly designated
parties) for cleanup of hazardous waste at two sites to which it (or its
predecessor Nestle' Can) is alleged to have shipped such waste, one site at
which the Company's share of cleanup costs could exceed $100,000. See "Legal
Proceedings."
Pursuant to the agreement relating to the acquisition in 1987 from
Monsanto Company ("Monsanto") of substantially all of the business and
related fixed assets and inventory of Monsanto's plastic containers business
("Monsanto Plastic Containers"), Monsanto has agreed to indemnify the Company
for substantially all of the costs attributable to the past waste disposal
practices of Monsanto Plastic Containers. In connection with the acquisition
of DM Can, Del Monte has agreed to indemnify the Company for a period of
three years for substantially all of the costs attributable to any
noncompliance by DM Can with any environmental law prior to the closing,
including all of the costs attributable to the past waste disposal practices
of DM Can.
The Company is subject to the Occupational Safety and Health Act and
other laws regulating noise exposure levels in the production areas of its
plants.
Management does not believe that any of the matters described above
individually or in the aggregate will have a material effect on the Company's
capital expenditures, earnings, financial position or competitive position.
Research and Technology
The Company's research, product development and product engineering
efforts relating to its metal containers are conducted at its research center
at Oconomowoc, Wisconsin and at other plant locations.
The Company's research, product development and product engineering
efforts with respect to its plastic containers are currently performed by its
manufacturing and engineering personnel located at its Norcross, Georgia
facility. In addition to its own research and development staff, the Company
participates in arrangements with four non-U.S. plastic container
manufacturers that call for an exchange of technology among these
manufacturers. Pursuant to these arrangements, the Company licenses its blow
molding technology to such manufacturers.
Company History
Silgan was organized in August 1987 as a holding company to acquire
interests in various packaging manufacturers. On August 31, 1987, Silgan,
through Containers, purchased from Nestle' the business and related assets
and working capital of Nestle' Can for approximately $151 million in cash and
the assumption of substantially all of the liabilities of Nestle' Can. Also
on August 31, 1987, Silgan, through Plastics, purchased from Monsanto
substantially all the business and related fixed assets and inventory of
Monsanto Plastic Containers for approximately $43 million in cash and the
assumption of certain liabilities of Monsanto Plastic Containers. To finance
these acquisitions and to pay related fees and expenses, Silgan raised
approximately $222.5 million on August 31, 1987 by issuing $6 million of
common stock, $15 million of its 15% Cumulative Exchangeable Redeemable
Preferred Stock (the "Preferred Stock") and $85 million of its 14% Senior
Subordinated Notes due 1997 (the "14% Notes") and by borrowing $116.5 million
under its credit agreement.
During 1988, Containers acquired from The Dial Corporation its metal
container manufacturing division known as the Fort Madison Can Company ("Fort
Madison"), and from Nestle' its carton manufacturing division known as the
Seaboard Carton Division ("Seaboard").
During 1989, Plastics acquired Aim Packaging, Inc. ("Aim") and Fortune
Plastics, Inc. ("Fortune") in the United States, and Express Plastic
Containers Limited ("Express") in Canada, to improve its competitive position
in the HDPE container market. Such acquisitions were financed through
additional borrowings under Silgan's credit agreement.
Holdings was organized in April 1989 as a holding company to acquire all
of the outstanding common stock of Silgan. On June 30, 1989, Silgan
Acquisition, Inc. ("Acquisition"), a wholly owned subsidiary of Holdings,
merged with and into Silgan, and Silgan became a wholly owned subsidiary of
Holdings (the "1989 Mergers"). In connection with the 1989 Mergers, Holdings
received $109.4 million in proceeds from the issuance of $120 million
aggregate principal amount of its Senior Reset Debentures due 2004 (the
"Holdings Reset Debentures"), net of debt issuance costs of $10.1 million.
Additionally, Holdings received $14.6 million in proceeds from the issuance
of its Class B Common Stock. With such proceeds, payments of $69.9 million
were made to Silgan's stockholders and stock option holders in connection
with the 1989 Mergers and $25.2 million was advanced to Silgan and used by
Silgan to repay working capital loans. The balance of such proceeds, along
with additional term loan borrowings under Silgan's credit agreement of $24.0
million and a capital contribution of $5.0 million by the stockholders of
Silgan P.E.T. Holdings Inc. ("SPHI"), was used by Holdings in connection with
the purchase of Silgan P.E.T. Corp. ("Silgan PET") on August 1, 1989 for
$51.4 million, including $2.2 million of acquisition costs.
In 1989, Silgan PET, a wholly owned subsidiary of SPHI, acquired the
business and related assets of Amoco Container Company ("Amoco Container").
On July 13, 1990, Holdings and Silgan entered into a business combination
(the "SPHI Business Combination") pursuant to which SPHI became a majority
owned subsidiary of Silgan. The SPHI Business Combination was accounted for
in a manner similar to a pooling of interests. See "Selected Financial
Data."
In November 1991, Plastics sold its nonstrategic PET carbonated beverage
bottle business (the "PET Beverage Sale"), exiting that commodity business.
In 1992, Holdings and Silgan refinanced a substantial portion of their
indebtedness (the "Refinancing") pursuant to a plan to improve their
financial flexibility. The Refinancing included the following: (i) the
public offering in June 1992 by Silgan of $135 million principal amount of
its 11-3/4% Senior Subordinated Notes due 2002 (the "11-3/4% Notes"); (ii)
the private placement in June 1992 by Silgan of $50 million principal amount
of its Senior Secured Floating Rate Notes due 1997 (the "Secured Notes") with
certain institutional investors; (iii) the public offering in June 1992 by
Holdings of its 13-1/4% Senior Discount Debentures due 2002 (the "Discount
Debentures") for an aggregate amount of proceeds of $165.4 million; (iv) the
amendment of the Amended and Restated Credit Agreement, dated as of August
31, 1987, as amended (the "Amended and Restated Credit Agreement") among
Silgan and certain of its subsidiaries, the lenders named therein and Bankers
Trust Company ("Bankers Trust"), as agent, followed by the prepayment in June
1992 by Silgan of $30 million of term loans and the borrowing by Silgan of
approximately $17 million of working capital loans under the Amended and
Restated Credit Agreement; (v) the redemption in August 1992 of all of the
outstanding 14% Notes (the "14% Notes Redemption"); (vi) the redemption in
August 1992 of all of the outstanding Preferred Stock (the "Preferred Stock
Redemption"); (vii) the repayment by Silgan of a $25.2 million advance from
Holdings and the payment to Holdings of a $15.7 million dividend; (viii) the
payment by Holdings in cash of $15.3 million of interest payable on July 1,
1992 on the Holdings Reset Debentures; (ix) the redemption by Holdings in
July 1992 of all of the outstanding Holdings Reset Debentures (the "Holdings
Reset Debentures Redemption;" together with the "14% Notes Redemption" and
the "Preferred Stock Redemption" being sometimes herein referred to as the
"Redemptions"); and (x) the payment of transaction fees and expenses relating
to the Refinancing. Additionally, in June 1992 Aim, Fortune, Silgan PET and
SPHI were merged into Plastics.
On December 21, 1993, Containers acquired from Del Monte substantially
all of the fixed assets and certain working capital of Del Monte's container
manufacturing business in the United States for a purchase price of
approximately $73 million and the assumption of certain limited liabilities.
To finance the acquisition, (i) Silgan, Containers and Plastics
(collectively, the "Borrowers"), entered into a credit agreement, dated as of
December 21, 1993 (the "Credit Agreement") with the lenders from time to time
party thereto (the "Banks"), Bank of America National Trust and Savings
Association ("Bank of America"), as Co-Agent, and Bankers Trust, as Agent,
and (ii) Holdings issued and sold to Mellon Bank, N.A., as trustee for First
Plaza Group Trust, a group trust established under the laws of the State of
New York ("First Plaza"), 250,000 shares of its Class B Common Stock, par
value $.01 per share (the "Holdings Stock"), for a purchase price of $60.00
per share and an aggregate purchase price of $15 million. Additionally,
Silgan, Containers and Plastics borrowed term and working capital loans under
the Credit Agreement to refinance and repay in full all amounts owing under
the Amended and Restated Credit Agreement.
Item 2. Properties
Holdings' and Silgan's principal executive offices are located at 4
Landmark Square, Stamford, Connecticut 06901. The administrative
headquarters and principal places of business for Containers and Plastics are
located at 21800 Oxnard Street, Woodland Hills, California 91367 and 16216
Baxter Road, Suite 300, St. Louis, Missouri 63017, respectively. All of
these offices are leased by the Company.
The Company owns and leases properties for use in the ordinary course of
business. Such properties consist primarily of 22 metal container
manufacturing facilities, 12 plastic container manufacturing facilities and
one paper container manufacturing facility. Eighteen of these facilities are
owned and 17 are leased by the Company. The leases expire at various times
through 2020. Some of these leases provide for options to purchase or to
renew the lease.
Below is a list of the Company's operating facilities, including
attached warehouses, as of February 28, 1994:
Approximate
Building Area
Location (square feet)
--------- ---------------
Anaheim, CA 127,000 (leased)
Kingsburgh, CA 37,783 (leased)
Modesto, CA 35,585 (leased)
Oakland, CA 173,780 (leased)
Riverbank, CA 167,000
Stockton, CA 243,500
Stockton, CA 71,785 (leased)
Deep River, CT 140,000
Monroe, GA 117,000
Norcross, GA 59,000 (leased)
Broadview, IL 85,000
Rochelle, IL 175,000
Ft. Dodge, IA 49,500 (leased)
Fort Madison, IA 66,000
Ligonier, IN 284,000 (leased)
Seymour, IN 406,000
Franklin, KY 118,000 (leased)
Louisville, KY 30,000 (leased)
Maysville, KY 31,300
Mt. Vernon, MO 100,000
St. Joseph, MO 173,725
Port Clinton, OH 336,000 (leased)
Hillsboro, OR 47,000
Cambridge Springs, PA 55,000
Langhorne, PA 156,000 (leased)
Crystal City, TX 26,045 (leased)
Smithfield, UT 105,000
Toppenish, WA 98,000
Menomonee Falls, WI 116,000
Menomonie, WI 60,000 (leased)
Oconomowoc, WI 105,200
Plover, WI 44,495 (leased)
Waupun, WI 212,000
Mississauga, Ontario 80,000 (leased)
Mississauga, Ontario 60,000 (leased)
The Company owns and leases certain other warehouse facilities that are
detached from its manufacturing facilities. In addition, the Company owns
four other properties, two of which the Company subleases to a third party
and intends to sell and the other two of which the Company is not currently
using and intends to sell or sublease.
The Company believes that its plants, warehouses and other facilities
are in good operating condition, adequately maintained, and suitable to meet
its present needs and future plans. The Company believes that it has
sufficient capacity to satisfy the demand for its products in the foreseeable
future. To the extent that the Company needs additional capacity, management
believes that the Company can convert certain facilities to continuous
operation or make the appropriate capital expenditures to increase capacity.
Item 3. Legal Proceedings
Fidelity and EQJ Complaints. On June 28, 1989, a complaint was filed in
the Court of Chancery in the State of Delaware in and for New Castle County
jointly by Fidelity Bankers Life Insurance Company ("Fidelity"), which was
the beneficial holder of 150,000 shares of Class B common stock of Silgan,
and Ince & Co. ("Ince," together with Fidelity, sometimes hereinafter
referred to as the "Fidelity Plaintiffs"), which was the registered owner of
Fidelity's shares, against Silgan, Holdings, Morgan Stanley & Co.
Incorporated ("Morgan Stanley"), certain officers, directors and majority
stockholders of Silgan and certain other parties (the "Fidelity Complaint").
In addition, on September 14, 1989, a second complaint was filed in the Court
of Chancery in the State of Delaware in and for New Castle County jointly by
EQJ Partnership, Equitable Life Assurance Society of the United States,
Integrity Life Insurance Company, Kleinwort Benson Limited, Merrill Lynch
Corporate Bond Fund, Inc., New Locke Fund, SAM Associates, L.P., the
beneficial holder of shares of Class B common stock of Silgan held in the
name of Calmont & Co., as nominee, and SIB Nominees Ltd. (the "EQJ
Plaintiffs"), which plaintiffs were the beneficial holders of an aggregate of
900,000 shares of Class B common stock of Silgan, against Silgan, Holdings,
Acquisition and directors of Silgan (the "EQJ Complaint," together with the
Fidelity Complaint, sometimes hereinafter referred to as the "Complaints").
Although filed separately, the Complaints are similar and allege, among other
things, that the defendants breached their fiduciary duties of loyalty and
candor under Delaware law to minority stockholders of Silgan by engaging in
unfair dealings, attempting to effect a merger at a grossly inadequate price
and distributing misleading proxy materials. See "Business-Company History."
The Complaints also allege that various defendants aided and abetted these
purported breaches of fiduciary duties. The Complaints ask the court, among
other things, to rescind the 1989 Mergers and/or to grant to the plaintiffs
such damages, including rescissory damages, as are found by the court to be
proven at trial.
In the fall of 1989, all defendants moved to dismiss the Complaints for
failure to state a claim upon which relief can be granted. The court ruled
on the motion in the Fidelity Complaint on February 7, 1991, dismissing seven
of the ten claims asserted and allowing the Fidelity Plaintiffs leave to
plead one additional claim. On February 27, 1991, the Fidelity Plaintiffs
filed an amended complaint. On May 24, 1991, the defendants answered the
amended complaint, denying the material allegations and asserting affirmative
defenses. On January 29, 1992, Silgan and the EQJ Plaintiffs filed a
stipulation dismissing the EQJ Complaint with respect to all defendants
without prejudice to the right of the EQJ Plaintiffs to reinstate the action
at the conclusion of the appraisal proceeding instituted by the EQJ
Plaintiffs and described below.
On September 14, 1989, the EQJ Plaintiffs filed a Petition for Appraisal
(the "EQJ Appraisal") against Silgan in the Court of Chancery in the State of
Delaware in and for New Castle County. On October 13, 1989, the Fidelity
Plaintiffs filed a Petition for Appraisal (the "Fidelity Appraisal," together
with the EQJ Appraisal, sometimes hereinafter referred to as the
"Appraisals") against Silgan in the Court of Chancery in the State of
Delaware in and for New Castle County. Although filed separately, the
Appraisals both purport to invoke the rights of the EQJ Plaintiffs and the
Fidelity Plaintiffs to seek an appraisal of their shares of Class B common
stock of Silgan pursuant to Section 262 of the Delaware General Corporation
Law as a consequence of the 1989 Mergers.
The Fidelity Appraisal purports to seek, among other relief, a judgment
awarding the Fidelity Plaintiffs the fair value of their shares of Class B
common stock of Silgan in an unspecified amount. On May 13, 1991, Fidelity
was seized and placed into receivership by the Virginia State Corporation
Commission. As a result, the Fidelity Complaint and Fidelity Appraisal were
stayed until March 30, 1992. Both the Fidelity Complaint and Fidelity
Appraisal were dismissed in February 1994 following settlement with the
Fidelity Plaintiffs.
The EQJ Appraisal alleges that the EQJ Plaintiffs' shares are worth more
than three times the price offered in connection with the 1989 Mergers and
seeks, among other relief, a judgment awarding the EQJ Plaintiffs the fair
value of their shares of Class B common stock of Silgan in an amount of no
less than $24 per share. Discovery in the EQJ Appraisal is proceeding. The
court has set a pre-trial conference for May 2, 1994 and the week of May 9,
1994 for trial.
Management believes that there is no factual basis for the allegations
and claims contained in the Complaints. Management also believes that the
lawsuits are without merit and intends to defend the lawsuits vigorously. In
addition, management believes that the ultimate resolution of these matters
and the appraisal proceedings will not have a material effect on the
financial condition or results of operations of the Company.
Katell/Desert Complaint. On November 6, 1991, Gerald L. Katell
("Katell") and Desert Equities, Inc. ("Desert"), who are limited partners of
The Morgan Stanley Leveraged Equity Fund, L.P. ("MSLEF"), filed a
consolidated complaint in the Court of Chancery of the State of Delaware in
and for New Castle County (the "Katell/Desert Complaint") against a number of
defendants, including Holdings and Silgan. (The plaintiffs previously had
filed similar complaints in the New York Supreme Court, but the complaints
were dismissed on the grounds that, in the interests of substantial justice,
the actions should be heard in the courts of Delaware.) The plaintiffs
allege, among other things, that The Morgan Stanley Leveraged Capital Fund,
Inc. and Cigna Leveraged Capital Fund, Inc., the general partners of MSLEF,
breached duties owed to the limited partners. Holdings and Silgan are named
as defendants in Count III of such amended complaint, which charges them with
aiding and abetting breaches of fiduciary duty by MSLEF and the general
partners. These aiding and abetting claims are premised on the same
allegations concerning the 1989 Mergers that form the basis of the
Complaints. The plaintiffs claim damages in the amount of $4.67 million.
On December 9, 1991, all defendants moved to dismiss the Katell/Desert
Complaint on the grounds that (i) plaintiffs' claims are derivative in nature
and cannot be maintained as individual actions, (ii) plaintiffs' claims as to
shares of stock and other rights allegedly held by them directly fail to
state a claim and, in some cases, are time barred and (iii) with respect to
the aiding and abetting claims asserted against Holdings and Silgan, the
Katell/Desert Complaint fails to allege sufficient knowing participation to
constitute a cause of action for aiding and abetting breaches of fiduciary
duties. On February 17, 1992, the plaintiffs filed an amended complaint
asserting derivative claims on behalf of the partnership alternatively to
Counts I through IV of the Katell/Desert Complaint. The amended complaint
also deletes specific allegations as to the amount of damages, seeking a
determination of such damages by the court. All defendants moved to dismiss
the amended complaint on February 27, 1992. After full briefing and oral
argument, the court dismissed all claims against Holdings and Silgan by
memorandum opinion and order dated January 14, 1993. On January 25, 1993,
the plaintiffs moved for reargument, seeking that the court amend its order
to provide that the dismissal of the claims against certain defendants,
including Holdings and Silgan, be without prejudice to reinstatement. The
court denied this motion by order dated March 29, 1993.
Management believes that there is no factual basis for the allegations
and claims contained in the Katell/Desert Complaint. Management also
believes that the lawsuit is without merit and intends to defend the lawsuit
vigorously. In addition, management believes that the ultimate resolution of
these matters and the appraisal proceedings will not have a material effect
on the financial condition or results of operations of the Company.
Summer del Caribe. On October 17, 1989, the State of California, on
behalf of the California Department of Health Services, filed a suit in the
United States District Court for the Northern District of California against
the owners and operators of a recycling facility operated by Summer del
Caribe, Inc., Dale Summer and Lynn Rodich. The complaint also named 16 can
manufacturing companies, including Silgan, that had sent small amounts of
solder dross to the facility for recycling as "Responsible Parties" under the
California Superfund statute. The court has stayed the action. The Company
is one of 16 can companies participating in a steering committee. The
steering committee has actively undertaken a feasibility study and has
retained an environmental consultant. The Company has agreed with the other
can company defendants that Silgan's apportioned share of cleanup costs would
be 6.72% of the total costs of cleanup. Although the total cost of cleanup
has not yet been determined, the Company understands that the State of
California's current worst case estimate of total cleanup costs for all
parties is $5.5 million. The steering committee believes that the cost to
remediate will be no more than $3 million, approximately one-half the
government's estimate. Accordingly, the Company believes its maximum
exposure is not greater than 6.72% of $3 million, or approximately $202,000.
Other. Other than the actions mentioned above, there are no other
pending legal proceedings, other than ordinary routine litigation incidental
to the business of the Company, to which the Company is a party or to which
any of its properties are subject.
Item 4. Submission of Matters to a Vote of Security Holders.
On December 17, 1993, all of the holders of the Holdings Class A Stock
and Holdings Class B Stock (each as defined under "Market for Registrant's
Common Stock and Related Stockholder Matters"), by unanimous written consent,
approved the Restated Certificate of Incorporation of Holdings (the
"Certificate of Incorporation"). Pursuant to the Certificate of
Incorporation, the authorized shares of Holdings Class B Stock were increased
to 667,500 shares, the number of directors of Holdings was increased to six
directors and certain provisions relating to the election of directors were
modified. See "Security Ownership of Certain Beneficial Owners and
Management -- Description of Holdings Common Stock."
PART II.
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters.
Holdings has three classes of Common Stock, its Class A Common Stock,
par value $.01 per share (the "Holdings Class A Stock"), its Class B Common
Stock, par value $.01 per share (the "Holdings Class B Stock"), and its Class
C Common Stock, par value $.01 per share (the "Holdings Class C Stock,"
together with the Holdings Class A Stock and the Holdings Class B Stock being
herein referred to as the "Holdings Common Stock"). The Holdings Common
Stock is not publicly traded on any market or exchange. There are two
holders of record of the Holdings Class A Stock, two holders of record of the
Holdings Class B Stock and one holder of record of the Holdings Class C
Stock. See "Security Ownership of Certain Beneficial Owners and Management."
Holdings has not paid any dividends on the Holdings Common Stock. Pursuant
to the Amended and Restated Holdings Guaranty, dated as of December 21, 1993
made by Holdings in favor of the banks under the Credit Agreement, Bank of
America, as Co-Agent and Bankers Trust, as Agent, and, unless certain
financial tests are met, the indenture in respect of the Discount Debentures,
Holdings is prohibited from paying any such dividends, and it does not intend
to pay any such dividends in the foreseeable future.
Item 6. Selected Financial Data.
Set forth below are selected historical consolidated financial data of
Holdings at December 31, 1993, 1992, 1991 and 1990 and for the periods then
ended and as of December 31, 1989 and for the period April 6 through December
31, 1989. Also set forth below are selected historical financial data
derived from the historical financial statements of Silgan at December 31,
1989 and for the year then ended.
The selected historical consolidated financial data of Holdings at
December 31, 1993 and 1992 and for each of the three years in the period
ended December 31, 1993 (with the exception of employee data) were derived
from the historical consolidated financial statements that were audited by
Ernst & Young, independent auditors, whose report appears elsewhere in this
Annual Report on Form 10-K. The selected historical consolidated financial
data of Holdings at December 31, 1990 and 1989, for the year ended December
31, 1990 and for the period April 6, 1989 through December 31, 1989 were
derived from the historical audited consolidated financial statements of
Holdings. The selected consolidated historical financial data of Silgan at
December 31, 1989 and for the year then ended (with the exception of employee
data) were derived from the historical audited consolidated financial
statements of Silgan for such period.
The selected historical consolidated financial data should be read in
conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations and the audited financial statements and
accompanying notes thereto included elsewhere in this Annual Report on Form
10-K.
SELECTED FINANCIAL DATA
Predecessor
Silgan
Silgan Holdings Inc. Corporation
-------------------------------------------------------- -----------
Period from
April 6, 1989
Year Ended to Year Ended
December 31, December 31, December 31,
----------------------------------------
1993 1992 1991 1990 1989 1989
------ ----- ------- ------- ---------- --------
(Dollars in thousands)
Operating data:
Net sales . . . . . . . . . . . . . . . . $645,468 $630,039 $678,211 $657,537 $349,069 $610,682
Cost of goods sold . . . . . . . . . . . 571,174 554,972 605,185 582,991 310,413 537,485
------- ------- ------- ------- ------- -------
Gross profit . . . . . . . . . . . . . . 74,294 75,067 73,026 74,546 38,656 73,197
Selling, general and administrative
expenses . . . . . . . . . . . . . . 32,460 32,784 34,129 37,536 16,970 34,687
------- ------- ------- ------- ------- -------
Income from operations . . . . . . . . . 41,834 42,283 38,897 37,010 21,686 38,510
Interest expense and other related
financing costs . . . . . . . . . . . 54,265 57,091 55,996 55,115 27,997 36,714
Minority interest expense . . . . . . . . -- 2,745 3,889 3,356 1,502 --
Other expense (income) . . . . . . . . . 35 25 (396) (574) (559) (810)
------- ------- ------- ------ ------ ------
Income (loss) before income taxes . . . . (12,466) (17,578) (20,592) (20,887) (7,254) 2,606
Income tax provision (benefit) . . . 1,900 2,200 -- (2,495) 204 995
------ ------ ------ ------ ------ ------
Income (loss) before extraordinary
charges and cumulative effect of
changes in accounting principles . . (14,366) (19,778) (20,592) (18,392) (7,458) 1,611
Extraordinary charges relating to
early extinguishment of debt . . . . (1,341) (23,597) -- -- -- --
Cumulative effect of changes in
accounting principles . . . . . (6,276) -- -- -- -- --
------ ------ ------ ------ ------ ------
Net income (loss) . . . . . . . . . . . (21,983)
(43,375) (20,592) (18,392) (7,458) 1,611
Preferred stock dividend requirements . . -- -- -- -- -- 2,897
------ ------ ------ ------ ------ ------
Net income (loss) applicable to
common stockholders . . . . . . . . . $(21,983)$(43,375) $(20,592) $(18,392) $(7,458) $(1,286)
======= ======= ======= ======= ====== ======
Balance Sheet Data (at end of
period):
Fixed assets . . . . . . . . . . . . . . $290,395 $223,879 $230,501 $244,672 $245,039 $245,039
Total assets . . . . . . . . . . . . . . 497,633 389,035 390,693 443,889 445,449 431,489
Total long-term debt . . . . . . . . . . 505,718 383,232 315,461 337,821 342,249 213,512
Redeemable preferred stock of Silgan
(minority interest of Holdings) . . . -- -- 27,878 24,061 20,766 20,766
Common stockholders' equity
(deficiency) . . . . . . . . . . . . (170,017)(152,597) (109,222) (88,630) (70,238) 38,823
Other Data:
EBDITA . . . . . . . . . . . . . . . 76,095 $74,012 $72,141 $69,053 $36,116 $67,638
Capital expenditures . . . . . . . . . . 42,480 23,447 21,834 22,908 11,589 20,201
Depreciation and amortization . . . . . . 33,818 31,754 32,848 29,496 13,871 23,483
Number of employees (at end of
period) . . . . . . . . . . . . 3,330 3,340 3,560 4,330 4,210 4,210
(footnotes follow)
Notes to Selected Financial Data
- ---------------------------------
On December 21, 1993, the Company acquired from Del Monte substantially all of the fixed assets and certain working
capital of its container manufacturing business. The acquisition was accounted for as a purchase transaction and the
results of operations have been included with the Company's historical results from the acquisition date.
On November 15, 1991, the Company completed the PET Beverage Sale. For 1991, sales from the PET carbonated beverage
business were $33.4 million.
On July 13, 1990, Holdings and Silgan entered into the SPHI Business Combination with SPHI whereby SPHI became a
majority owned subsidiary of Silgan. The SPHI Business Combination was accounted for in a manner similar to a
pooling of interests and accordingly Holdings' consolidated financial statements include SPHI for periods subsequent
to July 24, 1989. SPHI was formed in 1989 to acquire, through its wholly owned subsidiary Silgan PET, the business
and related assets of Amoco Container. Such acquisition occurred on July 24, 1989 and was accounted for as a
purchase transaction.
Holdings was incorporated on April 6, 1989. On June 30, 1989, Holdings acquired all of the outstanding common stock
of Silgan. See "Business-Company History." Holdings did not have any operations from the date of inception through
June 30, 1989.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." The Company had previously reported under SFAS No. 96 "Accounting for Income Taxes."
There was no effect for the difference in methods at the date of adoption. Furthermore, the adoption of SFAS No. 109
had no effect on the Company's 1993 provision for income taxes.
During 1993, the Company adopted SFAS No. 106, "Employers Accounting for Postretirement Benefits Other than
Pensions," SFAS No. 109, "Accounting for Income Taxes" and SFAS No. 112, "Employers Accounting for Postemployment
Benefits." There is no tax effect as a result of these changes due to the net operating loss position of the
Company. The Company has elected not to restate prior year's financial statements for any of these pronouncements.
"EBDITA" means consolidated net income before extraordinary charges, cumulative effect of changes in accounting
principles and preferred stock dividends plus, to the extent reflected in the income statement for the period for
which consolidated net income is to be determined, without duplication, (i) consolidated interest expense (including
minority interest expense), (ii) income tax expense, (iii) depreciation expense, (iv) amortization expense, (v)
expenses relating to postretirement health care costs which amounted to $0.478 million in 1993, and (vi) charges
relating to the vesting of benefits under SARs in connection with the 1989 Mergers of $1.973 million and $4.835
million in Holdings' 1990 historical data and $1.973 million and $4.835 million in Silgan's 1990 and 1989 historical
data, respectively. The 1989 charge is not reflected in Holdings' historical data because such charge occurred prior
to the 1989 Mergers.
The number of employees at December 31, 1993 excludes 650 employees who joined the Company on December 21, 1993 as a
result of the acquisition by Containers of DM Can.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
Although the food can industry in the United States is relatively stable
and mature in terms of unit sales growth, Containers has realized compound
annual unit growth in excess of 7% since 1987. On a pro forma basis giving
effect to the acquisition of DM Can, unit sales growth of Containers is in
excess of 12% since 1987. Plastics is pursuing new markets for its plastic
containers, including the post-consumer recycled resin segment of the market.
Based upon published information and management's experience in the industry,
management believes that PET custom containers are replacing glass containers
for products such as mouthwash, salad dressing, peanut butter and liquor.
Management also believes that Plastics is well positioned because of its
technologically advanced equipment to respond to opportunities for future
growth in the rigid plastic container market.
Sales growth at Containers and Plastics has enabled the Company to
improve EBDITA by achieving economies of scale. Since 1991 Containers has
closed two smaller, higher cost facilities and Plastics has implemented an
aggressive consolidation and rationalization program that resulted in the
closing of three plants, the consolidation of technical and administrative
centers and a substantial reduction in personnel. In November 1991, Plastics
sold its nonstrategic PET carbonated beverage bottle business, exiting that
commodity business. The Company has reduced its selling and administrative
expenses and its manufacturing costs as a result of these actions.
In 1992, Holdings and Silgan completed the Refinancing to improve their
financial flexibility. See "Business -- Company History."
On December 21, 1993, Containers acquired the assets of Del Monte's
metal food and beverage container manufacturing business ("DM Can") in the
United States for approximately $73 million. In connection with the
acquisition of DM Can, Containers and Del Monte entered into a ten-year
supply agreement under which Containers will supply all of Del Monte's metal
container requirements for the packaging of food and beverages in the United
States and not less than 65% of Del Monte's annual requirements of metal
containers for the packaging of food and beverages at Del Monte's Irapuato,
Mexico facility. As a result of the acquisition of DM Can, the Company will
produce almost all of the containers necessary to package the canned
vegetable and fruit products of Del Monte, the largest provider of canned
fruits and vegetables in the United States.
In conjunction with the acquisition of DM Can, Silgan, Containers and
Plastics entered into the Credit Agreement with the Banks. The proceeds from
the Credit Agreement were used to finance, in part, the acquisition of DM
Can, repay in full amounts owing under the Amended and Restated Credit
Agreement and pay fees and expenses related thereto. Additionally, Holdings
issued and sold 250,000 shares of its Class B Common Stock for $15 million,
which amount Holdings contributed to the capital of Silgan.
The Company believes the combination of the nine DM Can facilities with
its existing thirteen can plants will create cost reduction opportunities
through plant rationalization and equipment investment as well as additional
cost savings from production scheduling and line reconfiguration.
This discussion should be read in conjunction with the selected
financial data, the historical statements of operations and the notes thereto
included elsewhere in this Annual Report on Form 10-K. In addition to the
discussion of historical results of operations, to provide more meaningful
information about the acquisition of DM Can, management has provided a pro
forma discussion of the results of operation of the Company for the year
ended December 31, 1993 as compared to the year ended December 31, 1992,
after giving effect to the acquisition of DM Can.
Results of Operations - Historical
Year Ended December 31, 1993 Compared with Year Ended December 31, 1992.
Net sales of metal containers increased $20.1 million, or 4.7%, to
$445.9 million for the year ended December 31, 1993, compared to $425.8
million for the same period in 1992. Net sales of metal containers to Nestle'
decreased $11.6 million to $214.1 million, compared to net sales of $225.7
million for the same period in 1992, primarily due to reduced demand by
Nestle'. Net sales of metal containers to other customers increased $31.7
million to $231.8 million, compared to net sales of $200.1 million for the
same period in 1992. The increase was primarily due to an increase in unit
sales to existing non-vegetable pack customers and the purchase of an
additional manufacturing facility in May 1993, which accounted for sales of
$12.5 million, offset, in part, by lower unit sales to vegetable pack
customers due to the extremely wet weather in the Midwest in the summer of
1993.
Net sales of plastic containers were $186.3 million for the year ended
December 31, 1993, $6.3 million lower than net sales of plastic containers of
$192.6 million for the same period in 1992. The decrease in net sales was
primarily attributable to lower unit sales to existing customers due to soft
market conditions.
Sales of other containers increased approximately 15% to $13.3 million
for the year ended December 31, 1993, compared to $11.6 million for the same
period in 1992.
Cost of goods sold was 88.5% of net sales ($571.2 million) for the year
ended December 31, 1993, compared to 88.1% of net sales ($555.0 million) for
the same period in 1992. The increase in cost of goods sold as a percentage
of sales principally resulted from higher per unit manufacturing costs
incurred as a result of higher depreciation expense, lost margin on
outsourced cans due to capacity constraints in early 1993, offset, in part,
by general gains in manufacturing efficiencies.
Selling, general and administrative expenses were 5.0% of net sales
($32.5 million) for the year ended December 31, 1993, compared to 5.2% ($32.8
million) for the same period in 1992. The decrease in selling, general and
administrative expenses as a percentage of sales was principally attributable
to the maintenance of a constant level of expenditures on a greater sales
base.
Income from operations as a percentage of net sales was 6.5% ($41.8
million) for the year ended December 31, 1993, compared to 6.7% ($42.3
million) for the same period in 1992. The 0.2% decrease in income from
operations as a percentage of sales was due primarily to the aforementioned
decrease in gross profit margin.
Interest expense decreased by approximately $5.5 million to $54.3
million for the year ended December 31, 1993 compared with $59.8 million
(including minority interest expense of $2.7 million) for the same period in
1992. The decrease principally reflected the benefit of the refinancing in
June 1992 of the Company's and Silgan's debt and Silgan's preferred stock at
lower average interest rates.
The provisions for income taxes for 1993 and 1992 were comprised of
state and foreign components and recognized the benefit of certain deductions
for federal income tax which were available to Holdings. Effective January
1, 1993, the Company adopted SFAS No. 109. The application of the new
standard did not have an effect on the Company's provision for income taxes
for 1993.
The loss before extraordinary charges and cumulative effect of changes
in accounting principles for the year ended December 31, 1993 was $14.4
million, as compared to $19.8 million for the year ended December 31, 1992.
The decrease in the loss before extraordinary charges and cumulative effect
of changes in accounting principles was principally the result of the
decrease in interest expense in 1993.
As a result of the refinancing of the Amended and Restated Credit
Agreement in conjunction with the acquisition of DM Can and the refinancing
in June 1992 of Silgan's debt and preferred stock and Holdings' debt, the
Company incurred extraordinary charges of $1.3 million and $23.6 million for
the early extinguishment of debt in 1993 and 1992, respectively.
During 1993 the Company adopted SFAS No. 106 and SFAS No. 112. The
cumulative effect of these accounting changes was to decrease net income by
$5.0 million and $1.3 million, respectively.
Year Ended December 31, 1992 Compared with Year Ended December 31, 1991
Net sales of metal containers decreased $9.5 million to $425.8 million
for the year ended December 31, 1992, compared to $435.3 million for the same
period in 1991. Net sales of metal containers to Nestle' increased $12.6
million to $225.7 million, compared to net sales of $213.1 million for the
same period in 1991, primarily due to increased unit sales of pet food
containers, offset, in part, by less demand for tomato cans due to a smaller
pack in 1992 than in the prior year and by the pass through of lower material
costs. Net sales of metal containers to other customers decreased $22.1
million to $200.1 million, compared to net sales of $222.2 million for the
same period in 1991. The decrease was primarily due to colder and wetter
summer weather experienced in the Midwest which resulted in a reduced
vegetable pack as compared to the prior year along with lower unit sales
volume as a result of the closing by the Company of two metal container
manufacturing facilities, partially offset by increased sales to existing
customers.
Net sales of plastic containers were $192.6 million for the year ended
December 31, 1992, $39.5 million lower than net sales of plastic containers
of $232.1 million for the same period in 1991. The decrease in net sales was
primarily attributable to the disposition of the PET carbonated beverage
bottle business in November 1991 which accounted for sales of $33.4 million
during the year ended December 31, 1991. The decrease in net sales of other
plastic containers of $6.1 million was attributable to lower average sales
prices due to the pass through of lower average resin costs and a change in
the mix of products sold.
Sales of other containers totaled $11.6 million for the year ended
December 31, 1992, compared to $10.8 million for the same period in 1991.
Costs of goods sold was 88.1% of net sales ($555.0 million) for the year
ended December 31, 1992, compared to 89.2% of net sales ($605.2 million) for
the same period in 1991. The decrease in cost of goods sold as a percentage
of sales principally resulted from lower per unit manufacturing costs
realized through improved manufacturing efficiencies in the Company's
existing plant facilities, the benefits realized from the closing of four
higher cost manufacturing plants in the latter part of 1991 and early 1992,
and the sale of the lower margin PET carbonated beverage business, offset, in
part, by lower margins realized on certain products due to competitive
pricing conditions.
Selling, general and administrative expenses were 5.2% of net sales
($32.8 million) for the year ended December 31, 1992, compared to 5.0% ($34.1
million) for the same period in 1991. The $1.3 million decrease was
principally attributable to cost savings generated from a reduction in
administrative personnel, partially offset by a charge for an uncollectible
account that has been fully reserved.
Income from operations as a percentage of net sales was 6.7% ($42.3
million) for the year ended December 31, 1992, compared to 5.7% ($38.9
million) for the same period in 1991. The 1.0% increase in income from
operations as a percentage of sales was due primarily to the improved overall
margins realized by the Company from its existing operations after closing
four higher cost manufacturing facilities in the latter part of 1991 and
early 1992 and the disposition in November 1991 of the lower margin PET
carbonated beverage business.
Interest expense increased by approximately $1.1 million to $57.1
million for the year ended December 31, 1992. The increase was due to
additional interest accruing at a higher rate on the higher balance of the
Holdings Reset Debentures, additional indebtedness which was outstanding in
the third quarter of 1992 because the 14% Notes Redemption and the Holdings
Reset Debentures Redemption did not take place until 60 and 30 days,
respectively, after the effectiveness of the Refinancing, offset, in part, by
lower average interest rates incurred on a lower average balance of bank
borrowings. Average bank borrowings have declined due to tighter management
of inventories and term loan repayments.
The provisions for income tax for the years ended December 31, 1992 and
1991 were comprised of state and foreign components.
As a result of the items discussed above, Holdings' loss before the
extraordinary charge for the year ended December 31, 1992 was $19.8 million,
$0.8 million less than Holdings' net loss for the year ended December 31,
1991 of $20.6 million.
As a result of the Refinancing, the Company incurred an extraordinary
charge of $23.6 million for the early extinguishment of debt. Such charge
reflects a $12.6 million expense for premiums paid in connection with the
Redemptions and the charge-off of $11.0 million for unamortized debt
financing costs related to the securities redeemed under the Redemptions.
Results of Operations - Pro Forma
The following discussion sets forth the pro forma results of operations
of the Company for the year ended December 31, 1993 as compared to the year
ended December 31, 1992, after giving effect to the acquisition of DM Can.
The following table sets forth, for the years ended December 31, 1993
and 1992, certain consolidated pro forma data. This data includes the
historical results of operations for the Company and DM Can and give effect
to the pro forma adjustments assuming the acquisition occurred at the
beginning of each year presented. The pro forma adjustments are based upon
available information and upon certain assumptions that the Company believes
are reasonable. The final purchase price allocation may differ from that
used for the pro forma data, although it is not expected that the final
allocation of purchase price will be materially different. The unaudited pro
forma combined financial data do not purport to represent what the Company's
financial position or results of operations would actually have been had the
transactions in fact occurred on the dates or at the beginning of the period
indicated, or to project the Company's financial position or results of
operations for any future date or period. This discussion should be read in
conjunction with the discussion of historical results of operations of the
Company for the years ended December 31, 1993 and 1992.
1993 1992
---- ----
(In Millions)
Net sales $818.6 $819.6
Income from operations 50.7 56.7
Loss before income taxes (8.1) (8.1)
Loss before extraordinary charges and (10.4) (11.1)
cumulative effect of changes in
accounting principles
Net loss (18.0) (34.7)
Management believes that pro forma income from operations in 1993
declined $6.0 million as compared to the prior year primarily as a result of
a one-time inventory reduction by Del Monte in anticipation of the sale of DM
Can to Containers and, to a lesser extent, due to lower vegetable pack sales
as a result of adverse growing conditions in the Midwest in the summer of
1993.
The pro forma loss before income taxes for 1993 and 1992 was $8.1
million. Management believes that this resulted from the one-time inventory
reduction and reduced demand for vegetable pack containers as referred to
above, offset by lower interest expense in 1993 due to the benefits realized
from the Refinancing.
Capital Resources and Liquidity
The Company's liquidity requirements arise primarily from its
obligations under the indebtedness incurred in connection with its
acquisitions, capital investment in new and existing equipment and the
funding of the Company's seasonal working capital needs. Historically, the
Company has met these liquidity requirements through cash flow generated from
operating activities and working capital borrowings. As described below,
beginning in December 1996 the Company's liquidity requirements may also be
affected by the interest associated with Holdings' indebtedness.
On December 21, 1993 Silgan, Containers and Plastics entered into the
Credit Agreement to finance the acquisition of DM Can and to refinance and
repay in full all amounts owing under the Amended and Restated Credit
Agreement. In conjunction therewith the Banks loaned the Company $60.0
million of A Term Loans, $80.0 million of B Term Loans and $29.8 million of
working capital loans. In addition, Holdings issued and sold 250,000 shares
of its Class B Common Stock for $15.0 million. With these proceeds, the
Company (i) repaid $41.5 million of term loans and $60.8 million of working
capital loans under the Amended and Restated Credit Agreement; (ii) acquired
from Del Monte substantially all the fixed assets and certain working capital
of Del Monte's container manufacturing business for approximately $73
million; and (iii) paid fees and expenses of $8.9 million.
For 1993, the Company used cash generated from operations of $48.1
million and available cash balances of $2.7 million to fund capital
expenditures of $42.5 million, repay working capital loans of $7.2 million
(in addition to working capital loans which were repaid with proceeds from
the Credit Agreement), and pay $1.1 million of term loans. During the year,
the Company increased its annual amount of capital spending in order to
reduce costs and to add incremental production capacity. The increase in
inventory at December 31, 1993 as compared to the prior year principally
resulted from the inventory acquired as part of the acquisition of DM Can.
In June 1992, to improve their financial flexibility, Holdings and
Silgan effected the Refinancing. The Refinancing (i) lowered Holdings'
consolidated average cost of indebtedness by retiring the 14% Notes and the
Holdings Reset Debentures with new indebtedness bearing lower interest rates,
(ii) improved Silgan's liquidity and ability to further repay its
indebtedness by eliminating Silgan's obligation to pay cash dividends on the
Preferred Stock through the Preferred Stock Redemption and by deferring for
an additional two years (until December 1996) and reducing the cash interest
requirements on Holdings' indebtedness, (iii) provided Holdings with
additional financial flexibility by eliminating restrictions in the indenture
relating to the 14% Notes on Silgan's ability to pay dividends to Holdings in
order to fund interest payments on Holdings' indebtedness through the 14%
Notes Redemption and (iv) extended the average length of maturity of Silgan's
indebtedness by issuing the 11-3/4% Notes and the Secured Notes to refinance
$30 million of bank term loans and the 14% Notes.
In connection with the Refinancing, Holdings and Silgan received $333.1
million in proceeds from the issuance of the Secured Notes, the 11-3/4%
Notes, and the Discount Debentures net of debt issuance costs of $17.3
million. On June 29, 1992, Silgan repaid $30 million of term loans under the
Credit Agreement. On July 29, 1992, Holdings paid $181.6 million to redeem
the Holdings Reset Debentures. On August 16, 1992, Silgan paid $31.5 million
to redeem the Preferred Stock. On August 28, 1992, Silgan paid $89.3 million
to redeem the 14% Notes.
The Company borrowed working capital loans of $19.2 million during the
year ended December 31, 1992 which, along with cash provided by operations
during 1992 of $15.4 million (which included payment of $17.7 million in cash
interest on the Holdings Reset Debentures) were used principally to fund
capital expenditures of $23 million, to make term loan repayments of $10.2
million under the Credit Agreement (in addition to the term loan repayment
made in connection with the Refinancing), to pay cash dividends of $1.1
million on the Preferred Stock and to increase outstanding cash balances by
$1.1 million.
During 1991, cash provided from operations of $61.2 million was used to
fund capital expenditures of $21.8 million and scheduled bank term loan
repayments of $25 million. The balance of the cash provided from operations
during the year of $14.4 million was used to repay working capital loans and
principally resulted from the receipt in January 1991 of $16 million from a
major customer on an account normally settled by the prior year's end. In
November 1991, the Company completed the sale of its PET carbonated beverage
bottle business. The proceeds of approximately $12 million, net of costs
associated with such sale, were principally used to repay bank term loans.
Due to reduced working capital requirements, $4 million of working capital
loans was also repaid.
Since a portion of the proceeds realized from the Credit Agreement on
December 21, 1993 were used to repay working capital loans under the Amended
and Restated Credit Agreement, the Company was able to reduce the amount of
its commitment for working capital loans. Under the Credit Agreement, the
commitment for working capital loans was reduced by $41 million to $70
million. As of December 31, 1993, the outstanding principal amount of
working capital loans was $2.2 million and, subject to a borrowing base
limitation and taking into account outstanding letters of credit, the unused
portion of working capital commitments at such date was $61.7 million. The
decrease of $38.2 million in the outstanding principal amount of working
capital loans since December 31, 1992 resulted from the repayment of
approximately $30 million of working capital loans with proceeds from the
refinancing of the Credit Agreement as well as with cash generated from
operations.
Because the Company sells metal containers used in vegetable and fruit
processing, its sales are seasonal. As a result, a significant portion of
the Company's revenues are generated in the first nine months of the year.
As is common in the packaging industry, the Company must access working
capital to build inventory and then carry accounts receivable for some
customers beyond the end of the summer and fall packing season. Seasonal
accounts are generally settled by year end. Due to the Company's seasonal
requirements, the Company expects to incur short term indebtedness to finance
its working capital requirements, and it is estimated that approximately $50
million of the working capital revolver, including letters of credit, will be
utilized at its peak in July 1994.
In addition to its operating cash needs, the Company's cash requirements
over the next several years are anticipated to consist primarily of (i)
annual capital expenditures of $25 million to $33 million (approximately $13
million of which is nondiscretionary in each year), (ii) principal
amortization payments of A Term Loans under the Credit Agreement of $20
million in each of 1994, 1995 and 1996, (iii) expenditures of approximately
$13 million associated with the rationalization of facilities related to the
acquisition of DM Can, (iv) the scheduled maturity on September 15, 1996 of
the working capital loans and $80 million of B Term Loans under the Credit
Agreement, (v) payments by Silgan to Holdings to fund Holdings' semi-annual
cash interest requirements of $18.2 million on the Discount Debentures
commencing in December 1996, (vi) the scheduled maturity of the $50 million
principal amount of the Secured Notes in 1997, and (vii) the Company's
interest requirements (including interest on working capital loans, the
principal amount of which will vary depending upon seasonal requirements, the
Secured Notes and bank term loans, all of which bear fluctuating rates of
interest).
The Credit Agreement prohibits Silgan from paying any dividends or
making other distributions on its capital stock, making loans to or
transferring any assets to Holdings, merging or consolidating with Holdings
or assuming or guaranteeing any obligations of Holdings, although Silgan is
permitted to advance funds to Holdings to enable Holdings to pay certain
administrative expenses and taxes. Accordingly, until the maturity
(scheduled to occur on September 15, 1996) or earlier repayment of borrowings
under the Credit Agreement (or the amendment or waiver of the restrictive
covenants contained therein), Holdings will be unable to use any amount of
cash generated by the operations of Silgan and its subsidiaries. However,
interest on the Discount Debentures is not payable until December 15, 1996.
Interest on the Discount Debentures is payable at a rate of 13-1/4% per annum
and commencing on December 15, 1996 semi-annual interest payments of $18.2
million will be required to be made thereon. The ability of Holdings to pay
interest on the Discount Debentures on and after December 15, 1996 may depend
upon the ability of Silgan to pay dividends, or otherwise loan, advance or
transfer funds, to Holdings or the ability of Holdings to refinance the
Discount Debentures, obtain additional debt or equity financing or obtain
amendments to the indenture relating to the Discount Debentures. There can
be no assurance that any such alternative, if pursued, would be accomplished,
or that any such alternative would be accomplished in sufficient time to
enable Holdings to make timely payments of interest on the Discount
Debentures. Neither the Secured Notes nor the 11-3/4% Notes limits the
ability of Silgan to pay cash dividends to Holdings in order to enable
Holdings to pay interest on the Discount Debentures. Otherwise, subject to
limited exceptions, the Secured Notes and the 11-3/4% Notes prohibit the
payment of dividends or other distributions by Silgan on its capital stock.
Silgan has no obligation, legal or otherwise, to pay dividends or otherwise
loan, advance or transfer funds to Holdings in order to fund Holdings' debt
service requirements. The funding requirements of Holdings to service its
indebtedness (beginning in December 1996) may be met by Silgan through cash
generated by operations or borrowings or by Holdings through refinancings of
its existing indebtedness or additional debt or equity financings.
The Discount Debentures represent "applicable high yield discount
obligations" ("AHYDOs") within the meaning of Section 163(i) of the Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, the tax
deduction which would otherwise be available to Holdings in respect of the
accretion of interest on the Discount Debentures during their noncash
interest period ending June 15, 1996 ($109.6 million) has been and will
continue to be deferred, which, in turn, will increase the taxable income of
Holdings and reduce the after-tax cash flows of Holdings. However, as a
result of Holdings' utilization of its net operating loss carryforward, which
currently amounts to approximately $105 million for regular federal income
tax purposes, the effect of such deferral on the regular federal income taxes
of Holdings has been and will continue to be mitigated until such net
operating loss carryforward is fully utilized.
In 1993, Holdings became subject to alternative minimum tax ("AMT").
Because Holdings has AMT net operating loss carryforwards, Holdings has
incurred and will continue to incur an AMT liability at a rate of 2%. In
1995, Holdings anticipates that the AMT net operating loss carryforward will
have been fully utilized. Thereafter, Holdings will incur an AMT liability
at a rate of 20% (or the applicable rate then in effect). Any AMT paid is
allowed as an indefinite credit carryover against Holdings' regular tax
liability in the future when and if Holdings' regular tax liability exceeds
the AMT liability.
The deferred accreted interest will not be deductible until the
redemption, retirement or other repayment of the Discount Debentures (other
than with stock or debt of Holdings or a related party). Until the deferred
accreted interest is deductible, except to the extent the net operating loss
carryforward is available, Holdings will realize taxable income sooner and in
a greater amount than if the deferred accreted interest on the Discount
Debentures were deductible as it accretes. Depending upon its tax position
and financial condition and the benefit which may be available through the
deduction of the deferred accreted interest, Holdings could decide in the
future to refinance the Discount Debentures or a portion thereof prior to
their stated maturity date. In such event, the full amount of the deferred
accreted interest (applicable to the Discount Debentures retired) should be
deductible under the carryback and carryforward rules under the Code unless
the holders of the Discount Debentures receive stock or debt of Holdings or a
related party in exchange for the Discount Debentures. No assurance can be
given that Holdings will be able to refinance the Discount Debentures at such
time; however, management believes that application of the AHYDO rules will
not have a material adverse effect on Holdings' financial condition or
ability to repay the Discount Debentures. In addition, the IRS has broad
authority to issue regulations under the AHYDO rules with retroactive effect
to prevent the avoidance of the purposes of those rules through agreements to
borrow amounts due under a debt instrument or other arrangements, and thus
these regulations, when issued, may affect the timing or availability of the
tax deductions for original issue discount on the Discount Debentures.
Management believes that cash generated by operations and funds from
working capital borrowings under the Credit Agreement will be sufficient to
meet the Company's expected operating needs, planned capital expenditures and
debt service requirements until the maturity of the working capital facility
under the Credit Agreement on September 15, 1996. Management also believes
that it will be able to replace the working capital facility under the Credit
Agreement with another facility on or prior to September 15, 1996 on terms
which will be acceptable to the Company. However, there can be no assurance
that the Company will be able to replace its working capital facility. In
such event, the Company could be required to consider alternative equity or
debt financings in order to meet its cash needs. The ability of the Company
to effect any such financing and the extent to which the Company may seek or
be required to obtain additional financing will depend upon a variety of
factors, including, the future performance of the Company and its
subsidiaries, which will be subject to prevailing economic conditions and to
financial, business and other factors (including the state of the economy and
the financial markets, demand for the products of the Company and its
subsidiaries, costs of raw materials, legislative and regulatory changes and
other factors beyond the control of the Company and its subsidiaries)
affecting the business and operations of the Company and its subsidiaries as
well as prevailing interest rates, actual amounts expended for capital
expenditures and other corporate purposes and the timing and amount of debt
prepayments or redemptions.
The Credit Agreement, the Secured Notes and the indentures relating to
the 11-3/4% Notes and the Discount Debentures each contain restrictive
covenants that, among other things, limit the Company's ability to incur
debt, sell assets and engage in certain transactions. Management does not
expect these limitations to have a material effect on the Company's business
or results of operations. The Company is in compliance with all financial
and operating covenants contained in such financing agreements and believes
that it will continue to be in compliance during 1994 with all such
covenants.
Effect of Interest Rate Fluctuations and Inflation
Because the Company has indebtedness which bears interest at floating
rates, the Company's financial results will be sensitive to changes in
prevailing interest rates. To mitigate the effect of significant changes in
interest rates, the Company may enter into interest rate protection
agreements (with counterparties that, in the Company's judgment, have
sufficient creditworthiness) with respect to a portion of its floating rate
indebtedness. At December 31, 1993, the Company was not a party to any
interest rate protection agreement.
Historically, inflation has not had a material effect on the Company,
other than to increase its cost of borrowing. In general, the Company has
been able to increase the sales prices of its products to reflect any
increases in the prices of raw materials.
Impact of New Accounting Standards
Postretirement Benefits. Effective January 1, 1993, the Company adopted
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions." Under Statement No. 106 the Company is required to accrue the
cost of retiree health and other postretirement benefits during the years
that covered employees render service. The cumulative effect of this
accounting change was to decrease net income by $5.0 million. This change in
accounting principle, excluding the cumulative effect, decreased pretax
income for the year ended December 31, 1993 by $0.5 million. Prior to 1993,
the Company recorded these benefits on a pay-as-you-go basis, and the Company
has elected not to restate prior years for this change. The new rules are
expected to result in an increase in net annual periodic postretirement
benefit costs of less than $1.0 million. See Note 16 to consolidated
financial statements of the Company included elsewhere in this Annual Report
on Form 10-K.
Income Taxes. Effective January 1, 1993 the Company adopted SFAS No.
109, "Accounting for Income Taxes." The Company had previously reported under
SFAS No. 96 "Accounting for Income Taxes." There was no effect for the
differences in methods at the date of adoption. Furthermore, the adoption of
SFAS No. 109 had no effect on the Company's 1993 provision for income taxes.
See Note 8 to consolidated financial statements of the Company included
elsewhere in this Annual Report on Form 10-K.
Item 8. Financial Statements and Supplementary Data.
See Item 14 below for a listing of financial statements and schedules
included therein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Management of Holdings
The current directors and executive officers of Holdings and their
respective ages, positions and principal occupations, five-year employment
history and other directorships held are furnished below:
Age at
March 15, Five-Year Employment
Name and Position 1994 History and Other Directorships Held
----------------- -------- ------------------------------------
R. Philip Silver 51 Prior to forming S&H, Inc. ("S&H")
Chairman of the Board and in 1987, President of Continental
Co-Chief Executive Can Company from June 1983 to August
Officer of Holdings and 1986; consultant to packaging
Silgan since March 1994; industry from August 1986 to August
formerly President of 1987; Vice Chairman of the Board and
Holdings and Silgan; Director of Sweetheart Holdings Inc.
Director of Holdings and Sweetheart Cup Company, Inc.
since April 1989 and of from September 1989 to January 1991;
Silgan since August 1987; Chairman of the Board and Director
Chairman of the Board of of Sweetheart Holdings Inc. and
Plastics since March Sweetheart Cup Company, Inc. from
1994; Director of January 1991 through August 1993;
Containers and Plastics Director, Johnstown America
since August 1987. Corporation.
D. Greg Horrigan 50 Prior to forming S&H in 1987,
President and Co-Chief Executive Vice President and
Executive Officer of Operating Officer of Continental Can
Holdings and Silgan since Company from 1984 to 1987; Chairman
March 1994; formerly of the Board and Director of
Chairman of the Board of Sweetheart Holdings Inc. and
Holdings and Silgan; Sweetheart Cup Company, Inc. from
Director of Holdings September 1989 to January 1991; Vice
since April 1989 and of Chairman of the Board and Directors
Silgan since August 1987; of Sweetheart Holdings Inc. and
Chairman of the Board of Sweetheart Cup Company, Inc. from
Containers since August January 1991 through August 1993.
1987; Chairman of the
Board of Plastics from
May 1991 to March 1994;
Director of Containers
and Plastics since August
1987.
James S. Hoch 34 Principal of Morgan Stanley & Co.
Director, Vice President Incorporated since 1993, Vice
and Assistant Secretary President of Morgan Stanley & Co.
of Holdings since January Incorporated from 1991 to 1993,
1991; Director of Silgan Associate of Morgan Stanley & Co.
since January 1991; Vice Incorporated from 1986 to 1990.
President and Assistant Director of Fort Howard Corporation,
Secretary of Silgan since Sullivan Communications, Inc.,
1987; Director, Vice Sullivan Graphics, Inc.
President and Assistant
Secretary of Containers
since January 1991;
Director, Vice President
and Assistant Secretary
of Plastics since January
1991.
Age at
March 15, Five-Year Employment
Name and Position 1994 History and Other Directorships Held
----------------- -------- ------------------------------------
Robert H. Niehaus 38 Managing Director of Morgan Stanley
Vice President, Assistant & Co. Incorporated since January 1,
Secretary and Director of 1990; Principal of Morgan Stanley &
Holdings since April Co. Incorporated from 1988 to 1989;
1989; Vice President, Vice President of Morgan Stanley &
Assistant Secretary and Co. Incorporated in 1987. Director
Director of Silgan since of American Italian Pasta Company,
August 1987; Vice Randall's Food Markets, Inc.,
President, Assistant Randall's Management Corp., Inc.,
Secretary and Director of Randall's Properties, Inc.,
Containers and Plastics Randall's Warehouse, Inc., Fort
since August 1987. Howard Corporation, Waterford
Wedgwood plc, Waterford Crystal
Ltd., Waterford Wedgwood UK plc, MS
Distribution Inc., Tennessee Valley
Steel Corporation, NCC L.P.,
Shuttleway and MS/WW Holdings Inc.
Harley Rankin, Jr. 54 Prior to joining the Company, Senior
Executive Vice President Vice President and Chief Financial
and Chief Financial Officer of Armtek Corporation; prior
Officer of Holdings since to Armtek Corporation, Vice
April 1989; Treasurer of President and Chief Financial
Holdings since January Officer of Continental Can Company
1992; Executive Vice from November 1984 to August 1986.
President and Chief Vice President, Chief Financial
Financial Officer of Officer and Treasurer of Sweetheart
Silgan since January Holdings Inc. and Vice President of
1989; Treasurer of Silgan Sweetheart Cup Company, Inc. from
since January 1992; Vice September 1989 to August 1993.
President of Containers
and Plastics since
January 1989; Treasurer
of Plastics since January
1994.
Harold J. Rodriguez, Jr. 38 Employed by Ernst & Young from 1978
Vice President of to 1987, last serving as Senior
Holdings and Silgan since Manager specializing in taxation.
March 1994; Vice Controller, Assistant Secretary and
President of Containers Assistant Treasurer of Sweetheart
and Plastics since March Holdings Inc. and Assistant
1994; Controller and Secretary and Assistant Treasurer of
Assistant Treasurer of Sweetheart Cup Company, Inc. from
Holdings and Silgan since September 1989 to August 1993.
March 1990; Assistant
Controller and Assistant
Treasurer of Holdings
from April 1989 to March
1990; Assistant
Controller and Assistant
Treasurer of Silgan from
October 1987 to March
1990.
Management of Containers
In addition to the person listed under "Management of Holdings"
above, the following are the principal executive officers of Containers:
Age at
March 15, Five-Year Employment
Name and Position 1994 History and Other Directorships Held
----------------- -------- ------------------------------------
James D. Beam 51 Vice President-Marketing & Sales of
President and a non-voting Containers from September 1987 to
Director of Containers July 1990; Vice President and
since July 1990. General Manager of Continental Can
Company, Western Food Can Division,
from March 1986 to September 1987.
Gerald T. Wojdon 58 General Manager of Manufacturing of
Vice President-Operations the Can Division of The Carnation
and Assistant Secretary of Company from August 1982 to August
Containers since September 1987.
1987.
Gary M. Hughes 51 Vice President, Sales and Marketing
Vice President - Sales & of the Beverage Division of
Marketing of Containers Continental Can Company from
since July 1990. February 1988 to July 1990; prior to
February 1988, was employed by
Continental Can in various regional
sales positions.
George S. Hartley 47 Vice President - Finance of Romanoff
Vice President - Finance, International, Inc. from 1990 to
Treasurer and Assistant 1993; Director, Business Planning of
Secretary since March 1994. Amphenol Corporation (Electronic
Connectors) from 1988 to 1989;
Continental Can Corporation, 1974-
1988, employed in various finance
and planning positions.
Dennis Nerstad 56 Vice President - Distribution and
Vice President since March Container Manufacturing of Del Monte
1994. from August 1989 to December 1993;
Director of Container Manufacturing
of Del Monte from November 1983 to
July 1989; prior to 1983, employed
by Del Monte in various regional and
plant positions.
Management of Plastics
In addition to the persons listed under "Management of Holdings"
above, the following are the principal executive officers of Plastics:
Age at
March 15, Five-Year Employment
Name and Position 1994 History and Positions
----------------- -------- ---------------------
Russell F. Gervais 50 President and Chief Executive
President and Non-voting Officer of Aim Packaging, Inc.
Director of Plastics since from March 1984 to September
December 1992; Vice 1989.
President-Sales & Marketing
of Plastics from September
1989 until December 1992.
Howard H. Cole 48 Manager of Personnel of
Vice President and Assistant Monsanto Engineered Products
Secretary of Plastics since Division of the Monsanto
September 1987. Company from April 1986 to
September 1987.
Charles Minarik 56 President of Wheaton Industries
Vice President-Operations and Plastics Group, from February
Commercial Development since 1991 to August 1992; Vice
May 1993. President-Marketing of Constar
International, Inc. from March
1983 to February 1991.
Item 11. Executive Compensation.
The following table sets forth information concerning the annual and
long term compensation for services rendered in all capacities to the Company
and its subsidiaries during the fiscal years ended December 31, 1993, 1992
and 1991 of those persons who at December 31, 1993 were (i) the Chief
Executive Officer of Holdings and (ii) the other four most highly compensated
executive officers of Holdings and its subsidiaries. No director of Holdings
or its subsidiaries receives any compensation for serving as a director of
Holdings or its subsidiaries. See "Certain Transactions - Management
Agreements."
Summary Compensation Table
Long Term
Annual Compensation Compensation
-------------------------------------------- ------------
Awards
------
Other
Annual Stock All Other
Name and Principal Position Year Salary Bonus Compensation Options/SARs Compensation
- --------------------------- ---- -------------- ------------- ------------ ------------ -----------------
R. Philip Silver 1993 $1,378,799 - - - -
(Chairman of the Board of 1992 1,528,844 - - - -
Holdings and Silgan and 1991 1,378,000 - - - -
Co-Chief Executive Officer of
Holdings and Silgan and
Chairman of the Board of
Plastics)
D. Greg Horrigan 1993 1,378,799 - - - -
(President of Holdings 1992 1,528,844 - - - -
and Silgan and Co-Chief 1991 1,378,000 - - - -
Executive Officer of
Holdings and Silgan and
Chairman of the Board of
Containers)
Harley Rankin, Jr. 1993 321,898 - - - -
(Executive Vice President, 1992 324,407 - - - -
Chief Financial Officer and 1991 303,200 - - - -
Treasurer of Holdings and
Silgan and Vice President
of Containers and Plastics)
James D. Beam 1993 239,949 $65,277 - - $24,883
(President of Containers) 1992 231,949 65,497 - - 24,215
1991 221,894 38,854 - - -
Gary M. Hughes 1993 167,763 45,701 - - 17,397
(Vice President - Sales and 1992 162,372 45,851 - - 16,952
Marketing of Containers) 1991 155,326 27,198 - - -
Gerald T. Wojdon 1993 167,763 45,701 - - 17,397
(Vice President - Operations 1992 162,372 45,850 - - 16,952
of Containers) 1991 155,326 27,198 - - -
- ---------------------------
The compensation of Messrs. Horrigan, Silver, Rankin and Rodriguez was paid by S&H and they received no direct
compensation from Holdings, Silgan or their respective subsidiaries. See "Certain Transactions -- Management
Agreements."
The salaries of Messrs. Beam, Hughes and Wojdon were paid by Containers.
Bonuses of Messrs. Beam, Hughes and Wojdon were earned by them in such year and paid in the following year, pursuant
to the Silgan Containers Corporation Performance Incentive Plan. Under the Silgan Containers Corporation Performance
Incentive Plan, executive officers and other key employees of Containers may be awarded cash bonuses provided that
Containers achieves certain assigned financial targets.
Reflects amounts contributed by Containers under the Silgan Containers Corporation Deferred Incentive Savings Plan
(the "Savings Plan"). Containers contributes to the Savings Plan an amount each year based on its profits for such
year, as determined by Containers' board of directors. Such contribution is allocated proportionately to
participants in accordance with their compensation. A participant's allocable share of such contribution becomes
fully vested after five years of service or, if earlier, upon reaching age 55, death, total and permanent disability
or termination on account of the sale or closure of a work facility.
OPTION/SAR VALUES AT DECEMBER 31, 1993
---------------------------------------
Value of
Number of Unexercised
Unexercised in-the-Money
Options/SARs at Options/SARs at
December 31, 1993 December 31, 1993
----------------- -----------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
R. Philip Silver . . . . . . . . . -- -- -- --
D. Greg Horrigan . . . . . . . . . -- -- -- --
Harley Rankin, Jr. . . . . . . 10,000 -- -0- --
James D. Beam . . . . . . 336 144 $402,390 $100,597
Gary M. Hughes . . . . . . 144 96 -0- -0-
Gerald T. Wojdon . . . . . 48 48 100,597 100,597
- --------------------------
Options are for, and tandem SARs relate to, shares of Holdings Class C Stock (as defined under "Security Ownership of
Certain Beneficial Owners and Management -- Description of Holdings Common Stock"). Value is the excess of the book
value of Holdings Class C Stock from the date of grant over the exercise price. In the event of a public offering or
third party sale, value would be based on fair market value. See "Stock Option Plans" below.
Options are for, and tandem SARs relate to, shares of Containers' common stock. As of December 31, 1993, 10,800
shares of Containers' common stock are issued and outstanding and an additional 1,200 shares of Containers' common
stock are authorized but not issued. Value is the excess of the book value of Containers' common stock from the date
of grant, less the portion of parent debt allocable to Containers, over the exercise price. In the event of a public
offering or third party sale, value would be based on fair market value as determined under the Containers Plan (as
defined in "-- Stock Option Plans" below). See "Stock Option Plans" below.
240 options and tandem SARs were granted in June 1989 under the Containers Plan, for which the book value, as
computed under the Containers Plan, exceeds the exercise price. An additional 240 options and tandem SARs were
granted in July 1990 under the Containers Plan.
240 options and tandem SARs were granted in July 1990 under the Containers Plan.
240 options and tandem SARs were granted in June 1989 under the Containers Plan, of which 144 SARs have been
exercised prior to 1993.
Pension Plans
The Company has established pension plans (the "Pension Plans") covering
substantially all of the salaried employees of Containers and Plastics,
respectively, including the executive officers (the "Containers Pension Plan"
and the "Plastics Pension Plan," respectively). The Pension Plans are
defined benefit plans intended to be qualified pension plans under Section
401(a) of the Code, under which pension costs are determined annually on an
actuarial basis with contributions made accordingly. The pension benefits at
normal retirement under each Pension Plan are generally comparable to the
benefits under the pension plan covering individuals at Nestle' Can or
Monsanto, as the case may be, at the time of acquisition in 1987.
Certain salaried employees of Containers, including Containers'
executive officers, were covered by the Carnation Employees Plan Number Two
for United States Employees (the "Carnation Pension Plan") immediately prior
to the acquisition of Nestle' Can. The Containers Pension Plan recognizes
prior service under the Carnation Pension Plan for purposes of eligibility,
vesting and benefit accrual. The benefits payable at retirement under, or
upon vested termination from, the Containers Pension Plan are based on the
benefit formula and all other factors then in effect under the Containers
Pension Plan applied to all combined pension service. Such benefit shall be
offset by the accrued benefit, if any, such employee is entitled to receive
under the Carnation Pension Plan as of August 31, 1987.
Under the Containers Pension Plan, both the employer and participants
contribute. Participants contribute approximately 3% of their annual
compensation. The benefit for any participant thereunder is calculated under
the greater of either (i) a career average formula of the sum of, for each
year of participation up to March 31, 1991, 1% of annual base salary up to
$5,400 plus 2% of such salary over $5,400 or (ii) a final pay formula of the
average base salary over the final three years of employment multiplied by a
percentage (not to exceed 61-1/4%) based upon the participant's years of
credited service (not to exceed 35), less a percentage (not to exceed
approximately 50%) of such participant's primary social security benefit at
employment termination based upon the participant's years of credited service
(not to exceed 35). Compensation covered by the Containers Pension Plan is a
participant's base salary exclusive of any bonus, overtime or other extra
compensation. A participant becomes fully vested after five years of service
or upon reaching age 55, if earlier.
The following table illustrates the estimated annual normal retirement
benefits that are payable under the Containers Pension Plan based upon the
final pay formula. Such benefit levels assume retirement at age 65, the
years of service shown, continued existence of the Containers Pension Plan
without substantial change and payment in the form of a single life annuity
and includes benefits, if any, payable under the Carnation Pension Plan which
will be paid by that plan.
Containers Pension Plan Table
-----------------------------
Final Average Years of Service
--------------------------------------------------------------
Earnings 10 15 20 25 30 35
------------- -------- -------- -------- -------- ------- -------
$ 50,000 $ 7,130 $ 10,640 $ 14,260 $ 17,830 $ 21,390 $ 24,960
75,000 11,510 17,260 23,010 28,760 34,520 40,270
100,000 15,880 23,820 31,760 39,700 47,640 55,580
125,000 20,260 30,380 40,510 50,640 60,770 70,890
150,000 24,630 36,950 49,260 61,580 73,890 86,210
175,000 29,010 43,510 58,010 72,510 87,020 101,520
200,000 33,380 50,070 66,760 83,450 100,140 116,830
225,000 37,760 56,630 75,510 94,390 113,270 132,140
Pursuant to Section 401(a)(17) of the Code, there is a limit on the
amount of annual compensation which can be taken into account under the
Containers Pension Plan. The dollar limit on compensation for 1993 was
$235,840. The dollar limit on compensation for 1994 is $150,000. The dollar
limit, where applicable, will reduce the amount of benefits payable to highly
compensated participants in the Containers Pension Plan.
As of December 31, 1993, the years of credited service under the
Containers Pension Plan for each of the eligible executive officers named in
the Cash Compensation Table are as follows: James D. Beam, 6, Gary M. Hughes,
3, and Gerald T. Wojdon 34.
In conjunction with the acquisition of DM Can, the employees of Del
Monte that are employed by Containers will participate in the Containers
Pension Plan. Pursuant to the purchase agreement for the acquisition of DM
Can, Del Monte has agreed to transfer to the Containers Pension Plan assets
for benefits accrued for such employees while they were employed by Del
Monte.
Certain salaried employees of Plastics, including Plastics' executive
officers, were covered by the Monsanto Company Salaried Employees' Pension
Plan (the "Monsanto Pension Plan") immediately prior to the acquisition of
Monsanto Plastic Containers. The Plastics Pension Plan recognizes prior
service under the Monsanto Pension Plan for purposes of eligibility, vesting
and benefit accrual. The benefits payable at retirement under, or upon
vested termination from, the Plastics Pension Plan are based on the benefit
formula and all other factors then in effect under the Plastics Pension Plan
applied to all combined pension service. Such benefit is offset by the
accrued benefit, if any, such employee is entitled to receive under the
Monsanto Pension Plan as of August 31, 1987.
Under the Plastics Pension Plan, pensions are based on the greatest of
(i) years of benefit service multiplied by 1.4% of Average Earnings, which is
defined as the greater of (a) average compensation received during the final
36 months of employment or (b) average compensation received during the
highest three of the final five calendar years of employment; (ii) years of
benefit service multiplied by 1.5% of Average Earnings less a 50% social
security offset; or (iii) years of benefit service multiplied by $30.00. For
employees hired between April 1, 1986 and September 1, 1987, the formula is
the greater of (i) years of benefit service multiplied by 1.2% of Average
Earnings; or (ii) years of benefit service multiplied by 1.5% of Average
Earnings less a 50% social security offset. For employees hired after
September 1, 1987, the formula is years of benefit service multiplied by 1.1%
of Average Earnings. Average Earnings under the Plastics Pension Plan is a
participant's total cash income before deduction for contributions, if any,
to a plan pursuant to Section 401(k) of the Code or Section 125 of the Code
less any moving expense allowance but, in no event, shall Average Earnings
exceed 125% of base pay of the participant. A participant becomes fully
vested after five years of service or attainment of Normal Retirement Age (as
defined under the Plastics Pension Plan), if earlier.
The following table illustrates the estimated annual normal retirement
benefits that are payable under the Plastics Pension Plan based upon the
greater of 1.4% of Average Earnings, without reduction for social security or
other offset amounts, or 1.5% of Average Earnings less a 50% social security
offset. Such benefit levels assume retirement age at 65, the years of
service shown, continued existence of the Plastics Pension Plan without
substantial change and payment in the form of a single life annuity and
includes benefits, if any, payable under the Monsanto Pension Plan which will
be paid by that plan.
Plastics Pension Plan Table
---------------------------
Years of Service
-------------------------------------------------------------------------------
Final Average
Earnings 10 15 20 25 30 35
- -------------- --------- --------- --------- ---------- --------- ---------
$ 50,000 $ 7,000 $ 10,550 $ 14,000 $ 17,500 $ 21,000 $ 24,500
75,000 10,500 15,750 21,000 26,250 31,500 36,750
100,000 14,000 21,000 28,000 35,000 42,000 49,000
125,000 17,500 26,250 35,000 43,750 52,500 61,250
150,000 21,000 31,500 42,000 52,500 63,000 73,950
175,000 24,500 36,750 49,000 61,250 73,950 87,075
200,000 28,000 42,000 56,000 70,200 85,200 100,200
225,000 31,500 47,250 63,000 79,575 96,450 113,325
Pursuant to Section 401(a)(17) of the Code, there is a limit on the
amount of annual compensation which can be taken into account under the
Plastics Pension Plan. The dollar limit on compensation for 1993 was
$235,840. The dollar limit on compensation for 1994 is $150,000. The dollar
limit, where applicable, will reduce the amount of benefits payable to highly
compensated participants in the Plastics Pension Plan.
Stock Option Plans
Containers, Plastics and Holdings have established separate but
virtually identical stock option plans entitled, respectively, the Silgan
Containers Corporation Amended and Restated 1989 Stock Option Plan (the
"Containers Plan"), the Silgan Plastics Corporation Amended and Restated 1989
Stock Option Plan (the "Plastics Plan") and the Silgan Holdings Inc. Amended
and Restated 1989 Stock Option Plan (the "Holdings Plan"; collectively, the
"Plans"). Under each such Plan, participants may be granted options to
purchase shares of common stock or restricted stock and/or SARs. Options
granted may be either nonstatutory stock options or incentive stock options
under Section 422 of the Code. SARs granted may be related to options
concurrently granted or independent of any options.
The board of directors of each of the respective sponsoring companies,
through a committee, administers its respective plan and has the power to,
among other things, choose participants, the type of grant and all the terms
and conditions thereof, including number of shares covered by a grant and the
exercise price, if applicable. Only officers (including executive officers)
and other key employees are eligible to participate in the plan sponsored by
their employer. As of December 31, 1993, Containers and Plastics have
reserved 1,200 authorized but unissued shares of their respective common
stock, $.01 par value, for issuance under their respective plans, and
Holdings has reserved 15,000 authorized but unissued shares of its Class C
common stock, $.01 par value, for issuance under the Holdings Plan.
Pursuant to the Merger Agreement dated April 28, 1989 between Silgan,
Holdings and Acquisition (the "Merger Agreement"), all outstanding options
and SARs granted under predecessor stock option plans to the Containers Plan,
Plastics Plan and Holdings Plan (the "Predecessor Option Plans") were
surrendered for cancellation and, in partial consideration therefor, holders,
including executive officers, were issued in 1989 nonstatutory options and
related SARs under each of the Plans, as appropriate.
Generally, each option granted under the Plans becomes exercisable over
a period of five years, with 20% of the option having become exercisable on
June 30, 1990 and an additional 20% having become or becoming exercisable on
each anniversary thereafter. The purchase price of each option granted under
the Containers Plan ranges from $2,122 to $2,456 per share. The purchase
price of options granted under the Plastics Plan is $746 per share. The
purchase price of options granted under the Holdings Plan is $35.00 per
share. Each option granted under the Plans was granted with related SARs.
The SARs extend to all option shares and provide for a payment by the
sponsoring company to the holder of an amount equal to the excess of the book
value of a share of the sponsoring company at the SAR exercise date or, if
applicable, the fair market value of such share at the SAR exercise date
after a public offering of such shares, over the exercise price of the SAR
multiplied by the number of shares involved in the SAR exercise. Each option
and related SAR granted under each of the Plans expires on June 29, 1999 or
on such earlier date as the holder's employment shall terminate or within a
specified period after termination as provided in the respective Plans.
All options granted under any of the Plans must be evidenced by an
option agreement between the sponsoring company and the option recipient
embodying all the terms and conditions of the option grant; provided,
however, that (i) all options must be granted before the respective Plan
expires, (ii) incentive stock options granted must comply with Section 422 of
the Code, (iii) all options must be exercisable no earlier than one year from
the date of grant, (iv) no option shall be transferable or assignable
otherwise than by will or the laws of descent and distribution and, during
the lifetime of the recipient, such option shall be exercisable only by the
recipient, (v) all options must expire or remain exercisable for a limited
time after termination of employment, all as specified in the respective
Plans, and (vi) upon exercise of all options, full payment for the shares
covered shall be made in cash, shares of common stock of the sponsoring
company already owned or a combination thereof.
All SARs granted under any of the Plans must be evidenced by an
agreement containing the terms of exercise and manner of settlement;
provided, however, that (i) all SARs must be granted before the respective
Plan expires, (ii) SARs must be exercisable no earlier than one year from the
date of grant, (iii) SARs granted in tandem with options must have the same
terms and conditions as the related option and the exercise of a related SAR
extinguishes the related option to the extent exercised and vice versa and
(iv) SARs may contain a provision for automatic exercise on the last day of
the term thereof.
Restricted stock issued under any of the Plans must bear an appropriate
legend referring to the terms, conditions and restrictions applicable
thereto. The sponsoring company has a right to purchase and participants
have a right to require the sponsoring company to repurchase its common stock
acquired pursuant to the respective Plan upon the occurrence of certain
events in accordance with such Plan.
In the event of a public offering of any of Holdings' common stock or a
sale of Holdings to a third party, the options granted by Containers and
Plastics pursuant to their respective Plans and any stock issued upon
exercise of such options are convertible into either stock options or common
stock of Holdings. The calculation of the number of shares to be issued upon
the conversion of such options or shares will be determined based upon a
valuation of Holdings and an allocation of such value among its subsidiaries
(after giving effect to, among other things, that portion of the outstanding
indebtedness of Holdings allocable to each such subsidiary).
Certain Employment Agreements
Certain executive officers and other key employees of Containers and
Plastics (including Messrs. Beam and Wojdon) have executed employment
agreements. The initial term of such employment agreements is generally
three years from their effective date and is automatically extended for
successive one year periods unless terminated pursuant to the terms of such
agreements. Each such employment agreement provides for, among other things,
a minimum severance benefit equal to base salary and benefits for, in most
cases, a period of one year (or the remainder of the term of the agreement,
if longer) (i) if the employee is terminated by his employer for any reason
other than disability or for cause as specified in the agreement or (ii) if
the employee voluntarily terminates employment due to a demotion and, in some
cases, significant relocation, all as specified in the agreement.
The foregoing summaries of the various benefit plans and agreements of
the Company are qualified by reference to such plans and agreements, copies
of certain of which have been filed as exhibits to this Annual Report on Form
10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Certain Beneficial Owners of Holdings' Capital Stock
The following table sets forth, as of March 15, 1994, certain
information with respect to the beneficial ownership by certain persons and
entities of outstanding shares of capital stock of Holdings:
Number of Shares of each class of Percentage Ownership of
Holdings Common Stock Owned Holdings Common Stock
---------------------------------------- --------------------------------------------------
Class A Class B Class C Class A Class B Class C Consolidated
------- ------- ------- ------- ------- ------- ----------------
R. Philip Silver . . . . 208,750 -- -- 50% -- -- 19.24%
D. Greg Horrigan . . . . 208,750 -- -- 50% -- -- 19.24%
James S. Hoch . . . . . -- -- -- -- -- -- --
Robert H. Niehaus . . . -- -- -- -- -- -- --
Harley Rankin, Jr. . . . . . -- -- 10,000 -- -- 15.63% --
James D. Beam . . . . . -- -- -- -- -- -- --
Gary M. Hughes . . . . . -- -- -- -- -- -- --
Gerald T. Wojdon . . . . -- -- -- -- -- -- --
The Morgan Stanley Leveraged
Equity Fund II, L.P. . -- 417,500 -- -- 62.55% -- 38.48%
Mellon Bank, N.A., as trustee for
First Plaza Group Trust -- 250,000 -- -- 37.45% -- 23.04%
All officers and directors as a
group . . . . . . . . . . . 417,500 -- 14,000 100% -- 38.48%
21.88%
__________________________
This column reflects the percentage ownership of voting common stock that would exist if Holdings Class A Stock (as
defined under "Description of Holdings Common Stock" below) and Holdings Class B Stock (as defined under "Description
of Holdings Common Stock" below) were treated as a single class. Holdings Class C Stock (as defined under
"Description of Holdings Common Stock" below) generally does not have voting rights and is not included in the
percentage ownership reflected in this column. See "Description of Holdings Common Stock" below.
Director of Holdings and Silgan. Messrs. Silver and Horrigan are parties to a voting agreement pursuant to which
they have agreed to use their best efforts to vote their shares as a block. The address for such person is 4
Landmark Square, Stamford, CT 06901.
Director of Holdings and Silgan. The address for such person is c/o Morgan Stanley & Co. Incorporated, 1251 Avenue
of the Americas, New York, NY 10020.
Reflects shares that may be acquired through the exercise of vested stock options granted pursuant to Silgan Holdings
Inc. Amended and Restated 1989 Stock Option Plan.
Options to purchase shares of common stock of Containers and tandem SARs have been granted to such person pursuant to
the Silgan Containers Corporation Amended and Restated 1989 Stock Option Plan (the "Containers Plan"). Pursuant to
the Containers Plan, such options may be converted into stock options of Holdings (and the Containers' common stock
issuable upon exercise of such options may be converted into common stock of Holdings) in the event of a public
offering of any of Holdings' common stock or a sale of Holdings to a third party.
The address for The Morgan Stanley Leveraged Equity Fund II, L.P., is 1251 Avenue of the Americas, New York, NY
10020.
The address for First Plaza Group Trust is c/o General Motors Investment Management Corporation, 767 Fifth Avenue,
New York, NY 10153. Mellon Bank, N.A., acts as the trustee (the "Trustee") for First Plaza, a trust under and for
the benefit of certain employee benefit plans of General Motors Corporation ("GM") and its subsidiaries. These
shares may be deemed to be owned beneficially by General Motors Investment Management Corporation ("GMIMCo"), a
wholly owned subsidiary of GM. GMIMCo is serving as First Plaza's investment manager with respect to these shares
and in that capacity it has the sole power to direct the Trustee as to the voting and disposition of these shares.
Because of the Trustee's limited role, beneficial ownership of the shares by the Trustee is disclaimed.
Bankers Trust New York Corporation beneficially owns 50,000 shares of Holdings Class C Stock.
See "Description of Holdings Common Stock" and "Description of the
Holdings Organization Agreement" for additional information about the common
stock of Holdings, the holders thereof and certain arrangements among them.
Description of Holdings Common Stock
Certain of the statements contained herein are summaries of the detailed
provisions of the Certificate of Incorporation and are qualified in their
entirety by reference to the Certificate of Incorporation, a copy of which is
filed herewith.
Under the Certificate of Incorporation, Holdings has authority to issue
500,000 shares of Class A Common Stock, par value $.01 per share (the
"Holdings Class A Stock"), 667,500 shares of Class B Common Stock, par value
$.01 per share (the "Holdings Class B Stock"), and 1,000,000 shares of Class
C Common Stock, par value $.01 per share (the "Holdings Class C Stock" and,
together with the Holdings Class A Stock and Holdings Class B Stock, the
"Holdings Common Stock"). Holdings has an aggregate of 1,135,000 shares of
Holdings Common Stock outstanding as follows: (i) 417,500 shares of Holdings
Class A Stock; (ii) 667,500 shares of Holdings Class B Stock; and (iii)
50,000 shares of Holdings Class C Stock. Except as described below, the
rights, privileges and powers of Holdings Class A Stock and Holdings Class B
Stock are identical, with each share of each class being entitled to one vote
on all matters to come before the stockholders of Holdings.
Until the occurrence of a Change of Control (as defined in the
Certificate of Incorporation and as described below), the affirmative vote of
the holders of not less than a majority of the outstanding shares of Holdings
Class A Stock and Holdings Class B Stock, voting as separate classes, shall
be required for the approval of any matter to come before the stockholders of
Holdings, except that (i) the holders of a majority of the outstanding shares
of Holdings Class A Stock, voting as a separate class, have the sole right to
vote for the election and removal of three directors (the directors elected
by the holders of Holdings Class A Stock being referred to herein as "Class A
Directors"); (ii) the holders of a majority of the outstanding shares of
Holdings Class B Stock, voting as a separate class, have the sole right to
vote for the election and removal of all directors other than the Class A
Directors (the directors elected by the holders of Holdings Class B Stock
being referred to herein as "Class B Directors"); and (iii) the vote of not
less than a majority of the outstanding shares of Holdings Class B Stock
shall be required in certain circumstances set forth in the Certificate of
Incorporation. The holders of Holdings Class C Stock have no voting rights
except as provided by applicable law and except that such holders are
entitled to vote as a separate class on certain amendments to the Certificate
of Incorporation as provided therein. In the event Holdings sells shares of
any class of its common stock to the public, the distinctions between
Holdings Class A Stock and Holdings Class B Stock terminate, the powers,
including voting powers, of Holdings Class A Stock and Holdings Class B Stock
shall be identical upon compliance with certain provisions contained in the
Certificate of Incorporation, and any Regulated Stockholder (generally
defined to mean banks) will be entitled to convert all shares of Holdings
Class C Stock held by such stockholder into the same number of shares of
Holdings Class B Stock (or Holdings Class A Stock to the extent such Holdings
Class C Stock was issued upon conversion of Holdings Class A Stock).
After a Change of Control, the affirmative vote of the holders of not
less than a majority of the outstanding shares of Holdings Class A Stock and
Holdings Class B Stock, voting together as a single class, will be required
for the approval of any matter to come before the stockholders of Holdings,
except that the provisions described in clauses (i) and (ii) in the preceding
paragraph shall continue to apply from and after a Change of Control, and
except as otherwise provided in the Certificate of Incorporation with respect
to its amendment. Also, after a Change of Control, the number of Class B
Directors will be increased to five.
In the event that a vacancy among the Class A Directors or the Class B
Directors occurs at any time prior to the election of directors at the next
scheduled annual meeting of stockholders, the vacancy shall be filled, in the
case of the Class A Directors, by either (i) the vote of the holders of a
majority of the outstanding shares of Holdings Class A Stock, at a special
meeting of stockholders, or (ii) by written consent of the holders of a
majority of the outstanding shares of Holdings Class A Stock, and, in the
case of the Class B Directors, by either (i) the vote of the holders of a
majority of the outstanding shares of Holdings Class B Stock at a special
meeting or stockholders, or (ii) by written consent of the holders of a
majority of the outstanding shares of the Holdings Class B Stock.
A "Change of Control" is defined in the Certificate of Incorporation to
include the occurrence of any of the following events: (i) Messrs. Silver and
Horrigan shall collectively own, directly or indirectly, less than one-half
of the aggregate number of outstanding shares of Holdings Class A Stock owned
by them directly or indirectly on June 30, 1989 on a common stock equivalent
basis, or (ii) the acceleration of the indebtedness under the Credit
Agreement or the Discount Debentures, as a result of the occurrence of an
event of default thereunder relating to a payment default or a financial
covenant event of default.
Description of the Holdings Organization Agreement
Concurrently with the issuance and sale to First Plaza of the Holdings
Stock, Holdings, The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF
II"), Bankers Trust New York Corporation ("BTNY"), First Plaza and Messrs. R.
Philip Silver and D. Greg Horrigan entered into the Amended and Restated
Organization Agreement dated as of December 21, 1993 (the "Holdings
Organization Agreement") that provides for the termination of the
Organization Agreement dated as of June 30, 1989 by and among Holdings, MSLEF
II, BTNY and Messrs. Silver and Horrigan (except for the indemnification
provisions thereof, which provisions survive) and for the investment by First
Plaza in Holdings and the relationships among the stockholders and between
the stockholders and Holdings. Certain of the statements contained herein
are summaries of the detailed provisions of the Holdings Organization
Agreement and are qualified in their entirety by reference to the Holdings
Organization Agreement.
The Holdings Organization Agreement prohibits the disposition of
Holdings' common stock without the prior written consent of Messrs. Silver
and Horrigan and MSLEF II, except for (i) dispositions to affiliates (which,
in the case of First Plaza, includes any successor or underlying trust, and
which, in the case of MSLEF II, does not include any person which is not an
Investment Entity (as defined below)), (ii) dispositions to certain family
members of Messrs. Silver and Horrigan or trusts for the benefit of those
family members, (iii) certain transfers among MSLEF II, BTNY, First Plaza and
Messrs. Silver and Horrigan that comply with certain rights of first refusal
set forth in the Holdings Organization Agreement, which rights expire on June
30, 1994, (iv) dispositions to certain parties at any time on or after June
30, 1994, subject to certain other rights of first refusal discussed below,
(v) the sale by First Plaza to Holdings of all of the Holdings Stock acquired
by First Plaza on December 21, 1993, upon the exercise of Holdings' call
option as described below, and (vi) dispositions in connection with an
initial public offering of the common stock of Holdings, as described below.
Any transfer of Holdings' common stock (other than transfers described in
clauses (v) and (vi) of the preceding sentence) will be void unless the
transferee agrees in writing prior to the proposed transfer to be bound by
the terms of the Holdings Organization Agreement.
At any time on or after June 30, 1994, MSLEF II may effect a sale of
stock to an Investment Entity (generally defined as any person who (i) is
primarily engaged in the business of investing in securities of other
companies and not taking an active role in the management or operations of
such companies and (ii) does not permit the participation or involvement in
any way in the business or affairs of Holdings of a person who is engaged in
a business not described in clause (i)) or, in the event of certain defaults
under the amended and restated management services agreement by and between
S&H, Inc., a company wholly-owned by Messrs. Silver and Horrigan ("S&H"), and
Holdings (described below under "Description of Management Agreements"), to a
third party, in each case, if it first offers such stock to: (a) Holdings,
(b) the Group (defined generally to mean, collectively, Silver and Horrigan
and their respective affiliates and certain related family transferees and
estates, with Silver and his affiliates and certain related family
transferees and estates being deemed to be collectively one member of the
Group, and Horrigan and his affiliates and certain related family transferees
and estates being deemed to be collectively one member of the Group) and (c)
BTNY, in each case on the same terms and conditions as the proposed sale to
an Investment Entity or the proposed third party sale. In addition, in any
such sale by MSLEF II, BTNY and First Plaza must be given the opportunity to
sell the same percentage of its stock to such Investment Entity or third
party. At any time on or after June 30, 1994, each member of the Group may
transfer shares of stock to a third party if such holder first offers such
shares to: (a) the other member of the Group, (b) Holdings, (c) MSLEF II and
(d) BTNY, in each case on the same terms and conditions as the proposed third
party sale. At any time on or after June 30, 1994, BTNY may effect a sale of
stock to a third party if it first offers such shares to: (a) Holdings, (b)
MSLEF II and (c) the Group, in each case on the same terms and conditions as
the proposed third party sale.
At any time on or after June 30, 1994, either MSLEF II or the Group has
the right to require a recapitalization transaction. A recapitalization
transaction is defined as any transaction (such as a merger, consolidation,
exchange of securities or liquidation) involving Holdings pursuant to which
MSLEF II and the Group retain their proportionate ownership interest in the
surviving entity if the following conditions are met: (i) the value of any
securities of the surviving entity acquired or retained by the party not
initiating the recapitalization transaction does not exceed 67% of the
difference between (x) the value of such securities and any cash received by
such party and (y) all taxes payable as a result of the transaction, (ii) if
MSLEF II initiates the recapitalization transaction and will not own all the
voting equity securities of the surviving entity not owned by the Group, the
Group shall have the right to purchase such securities, (iii) if the Group
initiates the recapitalization transaction and will not own all of the voting
equity securities of the surviving entity, MSLEF II shall have the right to
purchase such securities, and (iv) the majority in principal amount of the
indebtedness incurred in connection with such transaction shall be held for
at least one year by persons not affiliated with either MSLEF II or any
member of the Group.
The Holdings Organization Agreement provides that in the event that
either Mr. Silver or Mr. Horrigan (each, a "Manager") dies or becomes
permanently disabled prior to June 30, 1994 (an "Inactive Manager"), such
Inactive Manager or his affiliates shall have the right to sell to Holdings
all Holdings Class A Stock held by the Inactive Manager at the Fair Market
Value (as defined in the Holdings Organization Agreement) of such stock,
provided that such stock must first be offered to the remaining Manager at
the same price. The Holdings Organization Agreement also provides that if
either Mr. Silver or Mr. Horrigan dies, becomes permanently disabled or is
convicted of any felony directly related to the business of Holdings prior to
June 30, 1994, the other Manager and his affiliates shall have the right to
purchase all of such person's Holdings Class A Stock at a price equal to Fair
Market Value in the case of death or disability and the Adjusted Book Value
(as defined in the Holdings Organization Agreement) in the case of a
conviction as stated above, and Holdings shall have the right to purchase all
such stock not purchased by the other Manager.
At any time prior to December 21, 1998, Holdings shall have the right
and option to purchase from First Plaza, and First Plaza shall have the
obligation to sell to Holdings, all (but not less than all) of the Holdings
Stock for a price per share equal to the greater of (i) $120 per share and
(ii) the purchase price necessary to yield on an annual basis a compound
return on investment of forty percent (40%). The number of shares subject to
such call and the call purchase price shall be proportionately adjusted to
take into account any stock dividend, stock split, combination of shares,
subdivision or other recapitalization of the capital stock of Holdings.
The Holdings Organization Agreement provides that at any time after June
15, 1996, the holders of a majority of the issued and outstanding shares of
Holdings Class A Stock and Holdings Class B Stock (considered together as a
class) may by written notice to Holdings require Holdings to pursue the first
public offering of Holdings' common stock pursuant to an effective
registration statement (an "IPO") on the terms and conditions provided in the
Holdings Organization Agreement. In addition to the portion of the IPO which
shall consist of shares of Holdings' common stock to be sold by Holdings, the
IPO may also include a secondary tranche consisting of shares of Holdings'
common stock to be sold by stockholders of Holdings.
Pursuant to the provisions of the Holdings Organization Agreement, each
of MSLEF II, BTNY, First Plaza and Messrs. Silver and Horrigan has agreed to
take all action (including voting its shares of Holdings' common stock) to
approve the adoption of the Restated Certificate of Incorporation of
Holdings, as amended, the Amended and Restated By-laws of Holdings, and the
Amended and Restated Management Services Agreement (the "Post-IPO Management
Services Contract"), in each case substantially in the form agreed to
pursuant to the Holdings Organization Agreement and in each case to become
effective at the time an IPO is completed. The Post-IPO Management Services
Contract provides, among other things, for the payment to S&H of management
fees of $2.0 million annually plus reimbursement of expenses. See "Certain
Relationships and Related Transactions -- Management Agreements" below.
Pursuant to the provisions of the Holdings Organization Agreement, MSLEF
II has agreed that it will not vote its shares of Holdings Class B Stock in
favor of any changes in the Certificate of Incorporation or By-laws of
Holdings which would adversely affect the rights of First Plaza, unless First
Plaza has consented in writing to such change. In addition, so long as First
Plaza shall hold not less than 18.73% of the issued and outstanding shares of
Holdings Class B Stock, First Plaza shall have the right to nominate one of
the Class B Directors to be elected at each annual meeting of stockholders in
accordance with the provisions of the Certificate of Incorporation, and the
holders of Holdings Class B Stock parties to the Holdings Organization
Agreement have agreed to vote their shares of Holdings Class B Stock in favor
of such nominee.
In addition, in the event that First Plaza, MSLEF II or BTNY shall
purchase any shares of Holdings Class A Stock, such purchaser has agreed that
it will vote such shares in accordance with the directions of the "holders of
a majority of the shares of Class A Stock held by the Group" (defined
generally to mean the holders of a majority of the aggregate of 417,500
shares of Holdings Class A Stock held by Messrs. Silver and Horrigan at
December 21, 1993, which at the time of any such determination have been
continuously and are held by the Group) until such time as a Change of
Control has occurred. In the event that Messrs. Silver or Horrigan shall
purchase any shares of Holdings Class B Stock, such purchaser agrees that it
will vote such shares in accordance with the directions of MSLEF II, unless
MSLEF II and First Plaza (together with their respective affiliates) shall
hold directly or indirectly less than one-half of the aggregate number of
shares of Holdings Class B Stock held by MSLEF II and First Plaza immediately
following the issuance and sale of the Holdings Stock to First Plaza on
December 21, 1993.
Pursuant to the terms of the Holdings Organization Agreement, Holdings
entered into an amended and restated management services agreement with S&H,
a corporation wholly owned by Messrs. Silver and Horrigan. See "Description
of Management Agreements" below.
The Holdings Organization Agreement terminates upon the earlier of (i)
the mutual agreement of the parties, (ii) such time as it becomes unlawful,
(iii) the completion of an IPO, and (iv) June 30, 1999. The parties may
agree to extend the term of the Holdings Organization Agreement.
Description of the Holdings Stockholders Agreement
Concurrently with the issuance and sale to First Plaza of the Holdings
Stock, Holdings, MSLEF II, BTNY, First Plaza and Messrs. Silver and Horrigan
entered into a Stockholders Agreement dated as of December 21, 1993 (the
"Stockholders Agreement") that provides for certain prospective rights and
obligations among the stockholders and between the stockholders and Holdings.
The operative provisions of the Stockholders Agreement do not take effect
until after the occurrence of an IPO, at which time the Holdings Organization
Agreement will have terminated in accordance with its terms as described
above under "Description of the Holdings Organization Agreement." Certain of
the statements contained herein are summaries of the detailed provisions of
the Stockholders Agreement and are qualified in their entirety by reference
to the Stockholders Agreement.
The Stockholders Agreement provides that for a period of eight years
after the IPO, each of MSLEF II and First Plaza shall have the right to
demand two separate registrations of its shares of Holdings' common stock
(equalling a total of four separate demand registrations); provided, however,
that such demand right will terminate as to MSLEF II or First Plaza, as the
case may be, at such time as MSLEF II or First Plaza, as the case may be,
together with its affiliates, owns less than five percent of the issued and
outstanding shares of Holdings' common stock at any time. If, at any time or
from time to time for a period of eight years after the IPO, Holdings shall
determine to register Holdings' common stock (other than in connection with
certain non-underwritten offerings), Holdings will offer each of MSLEF II,
BTNY, First Plaza and Messrs. Silver and Horrigan the opportunity to register
shares of Holdings' common stock it holds in a "piggyback registration."
The Stockholders Agreement prohibits the transfer prior to June 30, 1999
(or, in the case of any restriction applicable to First Plaza, December 21,
1998) by MSLEF II, First Plaza or Messrs. Silver or Horrigan of Holdings'
common stock without the prior written consent of Messrs. Silver and Horrigan
and MSLEF II, except for (i) transfers made in connection with a public
offering or a Rule 144 Open Market Transaction (as defined in the
Stockholders Agreement), (ii) transfers made to an affiliate, which, in the
case of a transfer by First Plaza or MSLEF II to an affiliate, must be an
Investment Entity (defined generally to be any person who is primarily
engaged in the business of investing in securities of other companies and not
taking an active role in the management or operations of such companies),
(iii) transfers made to certain family members of Messrs. Silver and Horrigan
or trusts for the benefit of those family members, (iv) certain transfers by
First Plaza to a third party that comply with certain rights of first refusal
of the Group and MSLEF II set forth in the Stockholders Agreement, (v)
certain transfers by MSLEF II to an Investment Entity or, in the event of
certain defaults under the amended and restated management services agreement
between S&H and Holdings, to a third party, that comply with certain rights
of first refusal of the Group set forth in the Stockholders Agreement, (vi)
certain transfers by either member of the Group to a third party that comply
with certain rights of first refusal of the other member of the Group and
MSLEF II set forth in the Stockholders Agreement, and (vii) in the case of
MSLEF II, a distribution of all or substantially all of the shares of
Holdings' common stock then owned by MSLEF II to the partners of MSLEF II (a
"MSLEF Distribution"). Notwithstanding the foregoing, MSLEF II may pledge
its shares of Holdings' common stock to a lender or lenders reasonably
acceptable to Holdings to secure a loan or loans to MSLEF II. In the event
of any proposed foreclosure of such pledge, such shares will be subject to
certain rights of first refusal of the Group set forth in the Stockholders
Agreement.
The Stockholders Agreement provides that until December 21, 1998, for so
long as MSLEF II and its affiliates (excluding the limited partners of MSLEF
II who may acquire shares of Holdings' common stock from MSLEF II in a MSLEF
Distribution) shall hold at least one-half of the number of shares of
Holdings' common stock held by MSLEF II on December 21, 1993 (as adjusted, if
necessary, to take into account any stock dividend, stock split, combination
of shares, subdivision or recapitalization of the capital stock of Holdings),
the parties and their Restricted Voting Transferees (as defined in the
Stockholders Agreement) shall use their best efforts (including to vote any
shares of Holdings' common stock owned or controlled by such person or
otherwise) to cause the nomination and election of two (2) members of the
Board of Directors of Holdings to be chosen by MSLEF II; provided, however,
that each such nominee shall be (i) either an employee of Morgan Stanley
whose primary responsibility is managing investments for MSLEF II (or a
successor or related partnership) or (ii) a person reasonably acceptable to
the Group not engaged in (as a director, officer, employee, agent or
consultant or as a holder of more than five percent of the equity securities
of) a business competitive with that of Holdings.
In addition, until December 21, 1998, for so long as the Group shall
hold at least one-half of the number of shares of Holdings' common stock held
by it in the aggregate on December 21, 1993 (as adjusted, if necessary, to
take into account any stock dividend, stock split, combination of shares,
subdivision or recapitalization of the capital stock of Holdings), the
parties and their Restricted Voting Transferees shall use their best efforts
(including to vote any shares of Holdings' common stock owned or controlled
by such person or otherwise) to cause the nomination and election of two (2)
individuals nominated by the "holders of a majority of the shares of [c]ommon
[s]tock held by the Group" (as such phrase is defined in the Stockholders
Agreement) as members of the Board of Directors of Holdings; provided,
however, that at least one (1) of such nominees shall be Silver or Horrigan
and the other person, if not Silver or Horrigan, shall be a person reasonably
acceptable to MSLEF II, so long as MSLEF II and its affiliates (other than
any affiliate which is not an Investment Entity and excluding the limited
partners of MSLEF II who may acquire shares of Holdings' common stock from
MSLEF II in a MSLEF distribution) shall hold at least one-half of the number
of shares of Holdings' common stock held by MSLEF II at the Closing Date (as
adjusted, if necessary, to take into account any stock dividend, stock split,
combination of shares, subdivision or recapitalization of the capital stock
of Holdings).
Subject to the terms of the preceding two paragraphs, for so long as the
Group shall hold at least one-half of the number of shares of Holdings'
common stock held by it in the aggregate at the Closing Date (as adjusted, if
necessary, to take into account any stock dividend, stock split, combination
of shares, subdivision or recapitalization of the capital stock of Holdings),
First Plaza and its Restricted Voting Transferees shall vote all shares of
Holdings' common stock held by them in favor of any other directors standing
for election to Holdings' Board of Directors for whom the holders of a
majority of the shares of Holdings' common stock held by the Group shall
direct First Plaza to vote.
The Stockholders Agreement further provides that until December 21,
1998, MSLEF II and its Restricted Voting Transferees shall vote all shares of
Holdings' common stock held by them against any unsolicited merger, or sale
of Holdings' business or its assets, if such transaction is opposed by the
holders of a majority of the shares of common stock held by the Group, unless
as of the applicable record date for such vote, the Group holds less than
ninety percent (90%) of the number of shares of Holdings' common stock held
by it in the aggregate at the Closing Date (as adjusted, if necessary, to
take into account any stock dividend, stock split, combination of shares,
subdivision or recapitalization of the capital stock of Holdings). Until
December 21, 1998, First Plaza and its Restricted Voting Transferees shall
vote all shares of common stock held by them against any unsolicited merger,
or sale of Holdings' business or its assets, if such transaction is opposed
by the holders of a majority of the shares of common stock held by the Group;
provided, however, that First Plaza and its Restricted Voting Transferees
shall not be required to vote their shares of Holdings' common stock in
accordance with the foregoing if (i) in connection with such merger or sale,
(x) First Plaza and its Restricted Voting Transferees propose to sell or
otherwise transfer all of their shares of Holdings' common stock to a third
party for aggregate cash consideration of less than $10 million and (y) the
Group and/or MSLEF II has not exercised their right of first refusal in
respect of such sale or transfer by First Plaza or such right of first
refusal in respect of the shares of Holdings' common stock held by First
Plaza shall have terminated, or (ii) as of the applicable record date for
such vote, the Group holds less than ninety percent (90%) of the number of
shares of Holdings' common stock held by it in the aggregate at the Closing
Date (as adjusted, if necessary, to take into account any stock dividend,
stock split, combination of shares, subdivision or recapitalization of the
capital stock of Holdings).
Item 13. Certain Relationships and Related Transactions.
Management Agreements
Holdings, Silgan, Containers and Plastics each entered into an amended
and restated management services agreement dated as of December 21, 1993
(collectively, the "Management Agreements") with S&H to replace in its
entirety its existing management services agreement, as amended, with S&H.
Pursuant to the Management Agreements, S&H provides Holdings, Silgan,
Containers and Plastics and their respective subsidiaries with general
management and administrative services (the "Services"). The Management
Agreements provide for payments to S&H (i) on a monthly basis, of $5,000 plus
an amount equal to 2.475% of consolidated earnings before depreciation,
interest and taxes of Holdings and its subsidiaries ("Holdings EBDIT"), for
such calendar month until Holdings EBDIT for the calendar year shall have
reached an amount set forth in the Management Agreements for such calendar
year (the "Scheduled Amount") and 1.65% of Holdings EBDIT for such calendar
month to the extent that Holdings EBDIT for the calendar year shall have
exceeded the Scheduled Amount but shall not have been greater than an amount
(the "Maximum Amount") set forth in the Management Agreements (the "Monthly
Management Fee") and (ii) on a quarterly basis, of an amount equal to 2.475%
of Holdings EBDIT for such calendar quarter until Holdings EBDIT for the
calendar year shall have reached the Scheduled Amount and 1.65% of Holdings
EBDIT for such calendar quarter to the extent that Holdings EBDIT for the
calendar year shall have exceeded the Scheduled Amount but shall not have
been greater than the Maximum Amount (the "Quarterly Management Fee"). The
Scheduled Amount was $65.5 million for the calendar year 1993 and increases
by $6.0 million for each year thereafter. The Maximum Amount is $90.197
million for the calendar year 1994, $95.758 million for the calendar year
1995, $98.101 million for the calendar year 1996, $100.504 million for the
calendar year 1997, $102.964 million for the calendar year 1998 and $105.488
million for the calendar year 1999. The Management Agreements provide that
upon receipt by Silgan of a notice from Bankers Trust that certain events of
default under the Credit Agreement have occurred, the Quarterly Management
Fee shall continue to accrue, but shall not be paid to S&H until the
fulfillment of certain conditions, as set forth in the Management Agreements.
The Management Agreements continue in effect until the earliest of: (i)
the completion of an IPO; (ii) June 30, 1999; (iii) at the option of each of
the respective companies, the failure or refusal of S&H to perform its
obligations under the Management Agreements, if such failure continues
unremedied for more than 60 days after written notice of its existence shall
have been given; (iv) at the option of MSLEF II (a) if S&H or Holdings is
declared insolvent or bankrupt or a voluntary bankruptcy petition is filed by
either of them, (b) upon the occurrence of any of the following events with
respect to S&H or Holdings if not cured, dismissed or stayed within 45 days:
the filing of an involuntary petition in bankruptcy, the appointment of a
trustee or receiver or the institution of a proceeding seeking a
reorganization, arrangement, liquidation or dissolution, (c) if S&H or
Holdings voluntarily seeks a reorganization or arrangement or makes an
assignment for the benefit of creditors or (d) upon the death or permanent
disability of both of Messrs. Silver and Horrigan; and (v) the occurrence of
a Change of Control (as defined in the Restated Certificate of Incorporation
of Holdings and as described under "Description of Holdings Common Stock"
above).
In addition to the management fees described above, the Management
Agreements provide for the payment to S&H on the closing date of the IPO of
an amount, if any (the "Additional Amount") equal to the sum of the present
values, calculated for each year or portion thereof, of (i) the amount of the
annual management fee for such year or portion thereof that otherwise would
have been payable to S&H for each such year or portion thereof for the period
beginning as of the time of the IPO and ending on June 30, 1999 (the
"Remaining Term") pursuant to the provisions described in the preceding
paragraph but for the occurrence of the IPO, minus (ii) the amount payable to
S&H for the Remaining Term at the rate of $2.0 million per year. The
Management Agreements further provide that the amounts described in clause
(i) of the first sentence of this paragraph will be calculated based upon
S&H's good faith projections of Holdings EBDIT for each such year (or portion
thereof) during the Remaining Term (the "Estimated Fees"), which projections
shall be made on a basis consistent with S&H's past projections. The
difference between the amount of Estimated Fees for any particular year and
$2 million shall be discounted to present value at the time of the IPO using
a discount rate of eight percent (8%) per annum, compounded annually.
Additionally, the Management Agreements provide that Holdings, Silgan,
Containers, Plastics and their respective subsidiaries shall reimburse S&H,
on a monthly basis, for all out-of-pocket expenses paid by S&H in providing
the Services, including fees and expenses to consultants, subcontractors and
other third parties, in connection with such Services. All fees and expenses
paid to S&H under each of the Management Agreements are credited against
amounts paid to S&H under the other Management Agreements. Under the terms
of the Management Agreements, Holdings, Silgan, Containers and Plastics have
agreed, subject to certain exceptions, to indemnify S&H and its affiliates,
officers, directors, employees, subcontractors, consultants or controlling
persons against any losses, damages, costs and expenses they may sustain
arising in connection with the Management Agreements.
The Management Agreements also provide that S&H may select a consultant,
subcontractor or agent to provide the Services. S&H has retained Morgan
Stanley to render financial advisory services to S&H. In connection with
such retention, S&H has agreed to pay Morgan Stanley a fee equal to 9.1% of
the fees paid to S&H under the Management Agreements.
The Credit Agreement does not permit the payment of fees under the
Management Agreements above amounts provided for therein.
For the years ended December 31, 1993, 1992 and 1991, pursuant to the
arrangements described above, S&H earned aggregate fees, including
reimbursable expenses and fees payable to Morgan Stanley, of $4.4 million,
$4.2 million and $4.0 million, respectively, from Holdings, Silgan,
Containers, Plastics, SPHI and Silgan PET and during 1993, 1992 and 1991,
Morgan Stanley earned fees of $337,000, $324,000 and $306,000, respectively.
Other
In connection with the 1989 Mergers, subject to the provisions of
Delaware law, Silgan agreed to indemnify each director, officer, employee,
fiduciary and agent of Silgan, Containers, Plastics and its subsidiaries and
their respective affiliates against costs, expenses, judgments, fines,
losses, claims, damages and settlements (except for any settlement effected
without Silgan's written consent) in connection with any claims, actions,
suits, proceedings or investigations arising out of or related to the 1989
Mergers or their financing, including certain liabilities arising under the
federal securities laws.
Simultaneously with the consummation of the 1989 Mergers, a tax
allocation agreement was entered into by Holdings, Silgan, Plastics and
Containers that permits Silgan and its subsidiaries to use the tax benefits
provided by the debt of Holdings and permits funds to be provided to Holdings
from Silgan and its subsidiaries in an amount equal to the federal and state
tax liabilities of Holdings, as the parent of the consolidated group
consisting of Holdings, Silgan and its Subsidiaries. Such tax allocation
agreement has been amended and restated from time to time to include new
members of the consolidated group.
In connection with the Amended and Restated Credit Agreement under the
Refinancing, the lenders thereunder (including Bankers Trust) received
certain fees amounting to $1.4 million. In connection with the Refinancing,
Morgan Stanley received as compensation for its services as underwriter for
the Notes Offering and Holdings Debentures Offering and as initial purchaser
of the Secured Notes an aggregate of $11.5 million.
In connection with the Credit Agreement entered into in December 1993,
the Banks (including Bankers Trust) received certain fees amounting to $8.1
million.
G. William Sisley, Secretary of the Holdings and Silgan, is a partner in
the law firm of Winthrop, Stimson, Putnam & Roberts. Winthrop, Stimson,
Putnam & Roberts provides legal services to Holdings, Silgan and their
subsidiaries.
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K.
(a)
Financial Statements:
SILGAN HOLDINGS INC.:
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets at December 31, 1993 and 1992 . . . . . . . F-2
Consolidated Statements of Operations for the years ended December 31, 1993,
1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Deficiency in Stockholders' Equity for the
years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993,
1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . F-8
SILGAN CORPORATION:
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . F-29
Consolidated Balance Sheets at December 31, 1993 and 1992 . . . . . . . F-30
Consolidated Statements of Operations for the years ended December 31,
1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . F-31
Consolidated Statements of Common Stockholder's Equity for the years ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . F-32
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . F-33
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . F-35
Schedules:
SILGAN HOLDINGS INC.:
III. Condensed Financial Information of Silgan Holdings Inc.:
Condensed Balance Sheets at December 31, 1993 and 1992 . . . . F-56
Condensed Statements of Operations for the years ended December 31,
1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . F-57
Condensed Statements of Cash Flows for the years ended December 31,
1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . F-58
SILGAN CORPORATION:
III. Condensed Financial Information of Silgan Corporation:
Condensed Balance Sheets at December 31, 1993 and 1992 . . . . F-59
Condensed Statements of Operations for the years ended December 31,
1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . F-60
Condensed Statements of Cash Flows for the years ended December 31,
1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . F-61
V. Schedules of Property, Plant and Equipment for the years ended December
31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . F-62
VI. Schedules of Accumulated Depreciation and Amortization of Property,
Plant and Equipment for the years ended December 31, 1993, 1992 and
1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-63
VIII. Schedules of Valuation and Qualifying Accounts for the years ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . F-64
All other financial statements and schedules not listed have been omitted
because they are not applicable, or not required, or because the required
information is included in the consolidated financial statements or notes
thereto.
Exhibits:
Exhibit
Number Description
- ------ -----------
3.1 Restated Certificate of Incorporation of Silgan, as amended
(incorporated by reference to Exhibit 3.1 filed with Silgan's Annual
Report on Form 10-K for the year ended December 31, 1993, Commission
File No. 1-11200).
3.2 By-laws of Silgan (incorporated by reference to Exhibit 3(ii) filed
with Silgan's Registration Statement on Form S-1, dated January 11,
1988, Registration Statement No. 33-18719).
3.3 Restated Certificate of Incorporation of Holdings (incorporated by
reference to Exhibit 1 filed with Holdings' Current Report on Form 8-
K, dated March 25, 1994, Commission File No. 33-28409).
3.4 By-laws of Holdings (incorporated by reference to Exhibit 3.4 filed
with Silgan's Registration Statement on Form S-1, dated May 1, 1989,
Registration Statement No. 33-28409).
4.1 Indenture, dated as of June 29, 1992, between Holdings and The
Connecticut National Bank, as trustee, with respect to the Discount
Debentures (incorporated by reference to Exhibit 1 filed with
Holdings' Current Report on Form 8-K dated July 15, 1992, Commission
File No. 33-47632).
4.2 Indenture dated as of June 29, 1992, between Silgan and Shawmut Bank,
N.A., as Trustee, with respect to the Notes (incorporated by reference
to Exhibit 1 filed with Silgan's Current Report on Form 8-K dated July
15, 1992, Commission File No. 33-46499).
4.3 Secured Notes Purchase Agreement dated as of June 29, 1992, between
Silgan and Morgan Stanley (incorporated by reference to Exhibit 2
filed with Silgan's Current Report on form 8-K dated July 15, 1992,
Commission File No. 33-46499).
4.4 Form of Holdings' 13-1/4% Senior Discount Debentures Due 2002
(incorporated by reference to Exhibit 4.4 filed with Holdings' Annual
Report on Form 10-K for the year ended December 31, 1992, Commission
File No. 33-28409).
4.5 Form of Silgan's 11-3/4% Senior Subordinated Notes due 2002
(incorporated by reference to Exhibit 4.5 filed with Holdings' Annual
Report on Form 10-K for the year ended December 31, 1992, Commission
File No. 33-28409).
4.6 Registration Rights Agreement, dated August 31, 1987, among Silgan and
each of the Purchasers who are signatory thereto with respect to
Silgan's Class B Common Stock (incorporated by reference to Exhibit
10(ii) filed with Silgan's Registration Statement on Form S-1, dated
January 11, 1988, Registration Statement No. 33-18719).
10.1 Agreement for Purchase and Sale of Assets, dated as of June 18, 1987,
between Carnation Company and Canaco Corporation (Containers)
(incorporated by reference to Exhibit 2(i) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719).
10.2 First Amendment to Agreement for Purchase and Sale of Assets, dated as
of July 15, 1987, between Carnation Company and Canaco Corporation
(Containers) (incorporated by reference to Exhibit 2(ii) filed with
Silgan's Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719).
10.3 Second Amendment to Agreement for Purchase and Sale of Assets, dated
as of August 31, 1987, between Carnation Company and Canaco
Corporation (Containers) (incorporated by reference to Exhibit 2(iii)
filed with Silgan's Registration Statement on Form S-1, dated January
11, 1988, Registration Statement No. 33-18719).
10.4 Asset Purchase Agreement, dated as of July 29, 1987, between Plastics
Corporation (Plastics) and Monsanto Company (incorporated by reference
to Exhibit 2(iv) filed with Silgan's Registration Statement on Form S-
1, dated January 11, 1988, Registration Statement No. 33-18719).
10.5 First Amendment to the Asset Purchase Agreement, dated as of July 29,
1987, between Plastics Corporation (Plastics) and Monsanto Company
(incorporated by reference to Exhibit 2(v) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719).
10.6 Agreement for Purchase and Sale of Assets, dated as of September 27,
1988, between Carnation Company and Containers (incorporated by
reference to Exhibit 1 filed with Silgan's Current Report on Form 8-K,
dated October 17, 1988).
10.7 Agreement for Purchase and Sale of Cartons, effective October 1, 1988,
between Containers and Carnation Company (incorporated by reference to
Exhibit 2 filed with Silgan's Current Report on Form 8-K, dated
October 17, 1988).
10.8 Agreement for Sale and Purchase of Containers, dated as of December 3,
1988, between Containers and Dial (incorporated by reference to
Exhibit 2 filed with Silgan's Current Report on Form 8-K, dated
December 19, 1988).
10.9 Asset Purchase Agreement, dated as of November 7, 1988, between
Containers and Dial (incorporated by reference to Exhibit 1 filed with
Silgan's Current Report on Form 8-K, dated December 19, 1988).
10.10 Amended and Restated Stock Purchase Agreement, dated as of January 1,
1989, among Aim, certain shareholders of Aim, and Silgan (incorporated
by reference to Exhibit 1 filed with Silgan's Current Report on Form
8-K, dated March 15, 1989).
10.11 Assignment and Assumption, dated as of March 1, 1989, between Silgan
and InnoPak Plastics Corporation (Plastics) (incorporated by reference
to Exhibit 2 filed with Silgan's Current Report on Form 8-K, dated
March 15, 1989).
10.12 Agreement for Purchase and Sale of Assets between Fortune and InnoPak
Plastics Corporation (Plastics) dated as of March 1, 1989
(incorporated by reference to Exhibit 1 filed with Silgan's Current
Report on Form 8-K, dated April 14, 1989).
10.13 Amendment to Agreement for Purchase and Sale of Assets, dated as of
March 30, 1989, between Fortune and InnoPak Plastics Corporation
(Plastics) (incorporated by reference to Exhibit 2 to Silgan's Current
Report on Form 8-K, dated April 14, 1989).
10.14 Assignment and Assumption Agreement, dated as of March 31, 1989,
between InnoPak Plastics Corporation (Plastics) and Fortune
Acquisition Corporation (incorporated by reference to Exhibit 3 to
Silgan's Current Report on Form 8-K, dated April 14, 1989).
10.15 Agreement for Purchase and Sale of Shares between and among InnoPak
Plastics Corporation (Plastics), Gordon Malloch and Jurgen Arnemann
and Express, dated as of March 1, 1989 (incorporated by reference to
Exhibit 5 to Silgan's Current Report on Form 8-K, dated April 14,
1989).
10.16 Amendment to Agreement for Purchase and Sale of Shares, dated as of
March 31 , 1989, among InnoPak Plastics Corporation (Plastics),
Express, Gordon Malloch and Jurgen Arnemann (incorporated by reference
to Exhibit 6 to Silgan's Current Report on Form 8-K, dated April 14,
1989).
10.17 Assignment and Assumption Agreement dated as of March 31, 1989,
between InnoPak Plastics Corporation (Plastics) and 827598 Ontario
Inc. (incorporated by reference to Exhibit 7 to Silgan's Current
Report on Form 8-K, dated April 14, 1989).
10.18 Employment Agreement, dated as of September 14, 1987, between James
Beam and Canaco Corporation (Containers) (incorporated by reference to
Exhibit 10(vi) filed with Silgan's Registration Statement on Form S-1,
dated January 11, 1988, Registration Statement No. 33-18719).
10.19 Amended and Restated Employment Agreement, dated as of June 18, 1987,
between Gerald Wojdon and Canaco Corporation (Containers)
(incorporated by reference to Exhibit 10(vii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719).
10.20 Employment Agreement, dated as of September 1, 1989, between Silgan,
InnoPak Plastics Corporation (Plastics), Russell F. Gervais and Aim
(incorporated by reference to Exhibit 5 filed with Silgan's Report on
Form 8-K, dated March 15, 1989).
10.21 Supply Agreement for Gridley, California effective August 31, 1987
(incorporated by reference to Exhibit 10(ix) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.22 Amendment to Supply Agreement for Gridley, California, dated July 1,
1990 (incorporated by reference to Exhibit 10.27 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.23 Supply Agreement for Gustine, California effective August 31, 1987
(incorporated by reference to Exhibit 10(x) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.24 Amendment to Supply Agreement for Gustine, California, dated March 1,
1990 (incorporated by reference to Exhibit 10.29 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.25 Supply Agreement for Hanford, California effective August 31, 1987
(incorporated by reference to Exhibit 10(xi) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.26 Amendment to Supply Agreement for Hanford, California, dated July 1,
1990 (incorporated by reference to Exhibit 10.31 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.27 Supply Agreement for Riverbank, California effective August 31, 1987
(incorporated by reference to Exhibit 10(xii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.28 Supply Agreement for Woodland, California effective August 31, 1987
(incorporated by reference to Exhibit 10(xiii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.29 Amendment to Supply Agreement for Woodland, California, dated July 1,
1990 (incorporated by reference to Exhibit 10.34 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.30 Supply Agreement for Morton, Illinois, effective August 31, 1987
(incorporated by reference to Exhibit 10(vii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.31 Amendment to Supply Agreement for Morton, Illinois, dated July 1,
1990 (incorporated by reference to Exhibit 10.36 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.32 Supply Agreement for Ft. Dodge, Iowa, effective August 31, 1987
(incorporated by reference to Exhibit 10(xiv) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.33 Amendment to Supply Agreement for Ft. Dodge, Iowa, dated March 1, 1990
(incorporated by reference to Exhibit 10.38 filed with Silgan's
Registration statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.34 Supply Agreement for Maysville, Kentucky, effective August 31, 1987
(incorporated by reference to Exhibit 10(xvi) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.35 Amendment to Supply Agreement for Maysville, Kentucky, dated March 1,
1990 (incorporated by reference to Exhibit 10.40 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.36 Supply Agreement for St. Joseph, Missouri, effective August 31, 1987
(incorporated by reference to Exhibit 10(xvii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.37 Amendment to Supply Agreement for St. Joseph, Missouri, dated March 1,
1990 (incorporated by reference to Exhibit 10.42 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.38 Supply Agreement for Trenton, Missouri, effective August 31, 1987
(incorporated by reference to Exhibit 10(xviii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.39 Amendment to Supply Agreement for Trenton, Missouri, dated March 1,
1990 (incorporated by reference to Exhibit 10.44 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.40 Supply Agreement for South Dayton, New York, effective August 31, 1987
(incorporated by reference to Exhibit 10(xix) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.41 Amendment to Supply Agreement for South Dayton, New York, dated March
1, 1990 (incorporated by reference to Exhibit 10.46 filed with
Silgan's Registration Statement on Form S-1, dated March 18, 1992,
Registration Statement No. 33-46499) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.42 Supply Agreement for Statesville, North Carolina, effective August 31,
1987 (incorporated by reference to Exhibit 10(xx) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.43 Supply Agreement for Hillsboro, Oregon, effective August 31, 1987
(incorporated by reference to Exhibit 10(xxi) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.44 Amendment to Supply Agreement for Hillsboro, Oregon, dated March 1,
1990 (incorporated by reference to Exhibit 10.49 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.45 Supply Agreement for Moses Lake, Washington, effective August 31, 1987
(incorporated by reference to Exhibit 10(xxii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.46 Amendment to Supply Agreement for Moses Lake, Washington, dated March
1, 1990 (incorporated by reference to Exhibit 10.51 filed with
Silgan's Registration Statement on Form S-1, dated March 18, 1992,
Registration Statement No. 33-46499) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.47 Supply Agreement for Jefferson, Wisconsin, effective August 31, 1987
(incorporated by reference to Exhibit 10(xxiii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.48 Amendment to Supply Agreement for Jefferson, Wisconsin, dated March 1,
1990 (incorporated by reference to Exhibit 10.53 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.49 Supply Agreement for Seaboard, effective October 1, 1988 (incorporated
by reference to Exhibit 2 filed with Silgan's Current Report on Form
8-K, dated October 17, 1988).
10.50 Supply Agreement for Fort Madison, dated as of December 3, 1988
(incorporated by reference to Exhibit 2 filed with Silgan's Current
Report on Form 8-K, dated December 19, 1988).
10.51 Amendment to Supply Agreements dated November 17, 1989 for Ft. Dodge,
Iowa; Hillsboro, Oregon; Jefferson, Wisconsin; St. Joseph, Missouri;
and Trenton, Missouri (incorporated by reference to Exhibit 10.49
filed with Silgan's Annual Report on Form 10-K for the year ended
December 31, 1989, Commission File No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order of the
Commission).
10.52 Raw Materials Agreement, dated as of November 12, 1986, by and between
Carnation and Alcoa (incorporated by reference to Exhibit 10(xxxix)
filed with Silgan's Registration Statement on Form S-1, dated
September 14, 1988, Registration Statement No. 33-18719).
10.53 Assignment of Raw Materials Agreement, dated as of August 31, 1987, by
and between Carnation and Alcoa (incorporated by reference to Exhibit
10(xi) filed with Silgan's Post-Effective Amendment No. 4 to its
Registration Statement on Form S-1, dated September 14, 1988,
Registration No. 33-18719).
10.54 Amendment to Raw Materials Agreement, dated February 21, 1990, by and
between Containers and Alcoa (incorporated by reference to Exhibit
10.52 filed with Silgan's Annual Report on Form 10-K for the year
ended December 31, 1989, Commission File No. 33-18719) (Portions of
this Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.55 InnoPak Plastics Corporation (Plastics) Pension Plan for Salaried
Employees (incorporated by reference to Exhibit 10.32 filed with
Silgan's Annual Report on Form 10-K for the year ended December 31,
1988, Commission File No. 33-18719).
10.56 InnoPak Plastics Corporation (Plastics) Compensation Investment Plan
for Salaried Employees (incorporated by reference to Exhibit (xli)
filed with Silgan's Post-Effective Amendment No. 4 to its Registration
Statement on Form S-1, dated September 14, 1988, Registration No. 33-
18719).
10.57 Containers Pension Plan for Salaried Employees (incorporated by
reference to Exhibit 10.34 filed with Silgan's Annual Report on Form
10-K for the year ended December 31, 1988, Commission File No. 33-
18719).
10.58 Non-Competition Agreement, dated as of January 1, 1989, among Silgan,
Aim, and certain shareholders of Aim (incorporated by reference to
Exhibit 4 filed with Silgan's Current Report on Form 8-K, dated March
15, 1989).
10.59 Sharonville Conversion Agreement, dated as of August 31, 1987, between
Monsanto and InnoPak Plastics Corporation (Plastics) (incorporated by
reference to Exhibit 10(xxix) filed with Silgan's Post-Effective
Amendment No. 4 to its Registration Statement on Form S-1, dated
September 14, 1988, Registration No. 33-18719).
10.60 Consent, dated August 11, 1987, by Yoshino Kogyosno Co., Ltd. to the
Sharonville Conversion Agreement (incorporated by reference to Exhibit
10(xxx) filed with Silgan's Post-Effective Amendment No. 4 to its
Registration Statement on Form S-1, dated September 14, 1988,
Registration No. 33-18719).
10.61 Lease, dated as of August 31, 1987, between Monsanto and InnoPak
Plastics Corporation (Plastics), concerning the land and plant in
Anaheim, California (incorporated by reference to Exhibit 10(xxxi)
filed with Silgan's Post-Effective Amendment No. 4 to its Registration
Statement on Form S-1, dated September 14, 1988, Registration No. 33-
18719).
10.62 Assignment and Assumption Agreement, dated as of August 31, 1987,
between Monsanto and Innopak Plastics Corporation (Plastics), with
respect to certain premises known as the Westport Plant located in
Westport, Missouri (incorporated by reference to Exhibit 10(xxxii)
filed with Silgan's Post-Effective Amendment No. 4 to its Registration
Statement on Form S-1, dated September 14, 1988, Registration No. 33-
18719).
10.63 Amendment to Lease, dated August 31, 1987, between Houston/St. Louis
Properties (Successor) and InnoPak Plastics Corporation (Plastics),
with respect to property located in Westport, Missouri (incorporated
by reference to Exhibit 10(xxxiii) filed with Silgan's Post-Effective
Amendment No. 4 to its Registration Statement on Form S-1, dated
September 14, 1988, Registration No. 33-18719).
10.64 Assignment and Assumption Agreement, dated as of August 31, 1987,
between Monsanto and InnoPak Plastics Corporation (Plastics), with
respect to certain premises at 2469 Schuetz Road, Westport, Missouri
(incorporated by reference to Exhibit 10(xxxiv) filed with Silgan's
Post-Effective Amendment No. 4 to its Registration Statement on Form
S-1, dated September 14, 1988, Registration No. 33-18719).
10.65 Assignment and Assumption Agreement, dated as of August 31, 1987,
between Monsanto and InnoPak Plastics Corporation (Plastics), with
respect to certain premises at 2451 Schuetz Road, Westport, Missouri
(incorporated by reference to Exhibit 10(xxxv) filed with Silgan's
Post-Effective Amendment No. 4 to its Registration Statement on Form
S-1, dated September 14, 1988, Registration No. 33-18719).
10.66 Landlord Estoppel Certificates dated August 17, 1987, with respect to
real property lease located in Westport, Missouri (incorporated by
reference to Exhibit 10(xxxvi) filed with Silgan's Post-Effective
Amendment No. 4 to its Registration Statement on Form S-1, dated
September 14, 1988, Registration No. 33-18719).
10.67 Landlord Estoppel Certificates dated August 25, 1987, with respect to
real property lease covering certain premises at 2451 Schuetz Road,
Westport, Missouri (incorporated by reference to Exhibit 10(xxxvii)
filed with Silgan's Post-Effective Amendment No. 4 to its Registration
Statement on Form S-1, dated September 14, 1988, Registration No. 33-
18719).
10.68 Express Guaranty dated as of March 31, 1989 (incorporated by reference
to Exhibit 10.66 to Holdings' Registration Statement on Form S-1,
dated May 1, 1989, Registration No. 33-28409).
10.69 Express Security Agreement dated as of March 31, 1989 (incorporated by
reference to Exhibit 10.67 to Holdings' Registration Statement on Form
S-1, dated May 1, 1989, Registration No. 33-28409).
10.70 Canadian Holdco Guaranty dated as of March 31, 1989 (incorporated by
reference to Exhibit 10.68 to Holdings' Registration Statement on Form
S-1, dated May 1, 1989, Registration No. 33-28409).
10.71 Canadian Holdco Pledge Agreement dated as of March 31, 1989
(incorporated by reference to Exhibit 10.69 to Holdings' Registration
Statement on Form S-1, dated May 1, 1989, Registration No. 33-28409).
10.72 Canadian Acquisition Co. Guaranty dated as of March 31, 1989
(incorporated by reference to Exhibit 10.70 to Holdings' Registration
Statement on Form S-1, dated May 1, 1989, Registration No. 33-28409).
10.73 Canadian Acquisition Co. Pledge Agreement dated as of March 31, 1989
(incorporated by reference to Exhibit 10.71 to Holdings' Registration
Statement on Form S-1, dated May 1, 1989, Registration No. 33-28409).
10.74 Agreement and Plan of Merger, dated as of April 28, 1989, among
Holdings, Acquisition and Silgan (incorporated by reference to Exhibit
2.6 to Holdings' Registration Statement on Form S-1, dated May 1,
1989, Registration No. 33-28409).
10.75 Lease between Containers and Riverbank Venture dated May 1, 1990
(incorporated by reference to Exhibit 10.99 filed with Silgan's Annual
Report on Form 10-K for the year ended December 31, 1989, Commission
File No. 33-18719).
10.76 Loan Agreement between The Iowa Department of Economic Development,
City of Iowa City and Iowa City Can Manufacturing Company, dated
November 17, 1988 (incorporated by reference to Exhibit 10.100 filed
with Silgan's Annual Report on Form 10-K for the year ended December
31,1989, Commission File No. 33-18719).
10.77 Promissory Note and Promissory Note Agreement dated November 17, 1988
from Iowa City Can Manufacturing Company to the City of Iowa City
(incorporated by reference to Exhibit 10.101 filed with Silgan's
Annual Report on Form 10-K for the year ended December 31, 1989,
Commission File No. 33-18719).
10.78 Mortgage between City of Iowa City, Iowa City Can Manufacturing
Company and Michael Development dated January 5, 1990 (incorporated by
reference to Exhibit 10.102 filed with Silgan's Annual Report on Form
10-K for the year ended December 31, 1989, Commission File No. 33-
18719).
10.79 Containers Master Equipment Lease with Decimus Corporation, dated as
of October 11, 1989 (incorporated by reference to Exhibit 10.103 filed
with Silgan's Annual Report on Form 10-K for the year ended December
31, 1989, Commission File No. 33-18719).
10.80 Underwriting Agreement dated June 22, 1989 between Holdings and Morgan
Stanley (incorporated by reference to Exhibit 1 filed with Amendment
No. 4 to Holdings' Registration Statement on Form S-1, dated June 23,
1989, Registration Statement No. 33-28409).
10.81 Amended and Restated Tax Allocation Agreement by and among Holdings,
Silgan, Containers, InnoPak Plastics Corporation (Plastics), Aim,
Fortune, SPHI and Silgan PET dated as of July 13, 1990 (incorporated
by reference to Exhibit 10.107 filed with Post-Effective Amendment No.
6 to Silgan's Registration Statement on Form S-1, dated August 20,
1990, Registration Statement No. 33-18719).
10.82 Sublease Agreement between Amoco and PET Acquisition Corp. (Silgan
PET) dated July 24, 1989 (incorporated by reference to Exhibit 10.111
filed with Post-Effective Amendment No. 6 to Silgan's Registration
Statement on Form S-1, dated August 20, 1990, Registration Statement
No. 33-18719).
10.83 Lease Agreement between the Trustees of Cabot 95 Trust and Amoco
Plastic Products Company dated August 16, 1978 (incorporated by
reference to Exhibit 10.112 filed with Post-Effective Amendment No. 6
to Silgan's Registration Statement on Form S-1, dated August 20, 1990,
Registration Statement No. 33-18719).
10.84 Contribution Agreement by and among Messrs. Silver, Horrigan, Rankin
and Rodriguez, MSLEF II and BTNY dated as of July 13, 1990
(incorporated by reference to Exhibit 2 filed with Silgan's Current
Report on Form 8-K, dated July 1990).
10.85 Asset Purchase Agreement, dated as of November 1, 1991 by and among
Silgan PET, Holdings and Sewell Plastics Inc. (incorporated by
reference to Exhibit 1 filed with Silgan's Current Report on Form 8-K,
dated December 2,1991).
10.86 Inventory and Equipment Purchase Agreement, dated as of November 1,
1991 by and among Silgan PET, Holdings and Sewell Plastics, Inc.
(incorporated by reference to Exhibit 2 filed with Silgan's Current
Report on Form 8-K, dated December 2, 1991).
10.87 Letter Agreement, dated November 15, 1991, amending the Asset Purchase
Agreement dated as of November 1, 1991 by and among Silgan PET,
Holdings and Sewell Plastics, Inc. (incorporated by reference to
Exhibit 3 to Silgan's Current Report on Form 8-K, dated December 2,
1991).
10.88 Letter Agreement, dated November 15, 1991, amending the Inventory and
Equipment Purchase Agreement dated as of November 1, 1991 by and among
Silgan PET, Holdings and Sewell Plastics, Inc. (incorporated by
reference to Exhibit 4 filed with Silgan's Current Report on Form 8-K,
dated December 2,1991).
10.89 Letter Agreement, dated November 31, 1991, amending the Inventory and
Equipment Purchase Agreement dated as of November 1, 1991 by and among
Silgan PET, Holdings and Sewell Plastics, Inc. (incorporated by
reference to Exhibit 5 filed with Silgan's Current Report on Form 8-K,
dated December 2, 1991).
10.90 Containers Deferred Incentive Savings Plan (incorporated by reference
to Exhibit 10.144 filed with Silgan's Registration Statement on Form
S-1, dated March 18, 1992, Registration Statement No. 33-46499).
10.91 Amended and Restated Credit Agreement dated as of June 18, 1992, among
Silgan, Containers, Plastics, various banks and Bankers Trust, as
Agent (incorporated by reference to Exhibit 4 filed with Silgan's
Current Report on Form 8-K dated July 15, 1992, Commission File No.
33-46499).
10.92 Amended and Restated Pledge Agreement dated as of June 18, 1992, made
by Silgan (incorporated by reference to Exhibit 5 filed with Silgan's
Current Report on Form 8-K dated July 15, 1992, Commission File No.
33-46499).
10.93 Amended and Restated Pledge Agreement dated as of June 18, 1992, made
by Containers and Plastics (incorporated by reference to Exhibit 6
filed with Silgan's Current Report on Form 8-K dated July 15, 1992,
Commission File No. 33-46499).
10.94 Amended and Restated Pledge Agreement dated as of June 18, 1992, made
by Holdings (incorporated by reference to Exhibit 7 filed with
Silgan's Current Report on Form 8-K dated July 15, 1992, Commission
File No. 33-46499).
10.95 Amended and Restated Security Agreement dated as of June 18, 1992,
among Plastics, Containers and Bankers Trust (incorporated by
reference to Exhibit 8 filed with Silgan's Current Report on Form 8-K
dated July 15, 1992, Commission File No. 33-46499).
10.96 Amended and Restated Holdings Guaranty dated as of June 18, 1992
(incorporated by reference to Exhibit 9 filed with Silgan's Current
Report on Form 8-K dated July 15, 1992, Commission File No. 33-46499).
10.97 Borrowers Guaranty, dated as of June 18, 1992, made by Silgan,
Containers and Plastics (incorporated by reference to Exhibit 10 filed
with Silgan's Current Report on Form 8-K dated July 15, 1992,
Commission File No. 33-46499).
10.98 Subsidiaries Guarantee, dated as of June 29, 1992, of Containers and
Plastics (incorporated by reference to Exhibit 11 filed with Silgan's
Current Report on Form 8-K dated July 15, 1992, Commission File No.
33-46499).
10.99 Underwriting Agreement, dated June 22, 1992, between Holdings and
Morgan Stanley with respect to the Discount Debentures (incorporated
by reference to Exhibit 2 filed with Holdings' Current Report on Form
8-K dated July 15, 1992, Commission File No. 33-47632).
10.100 Underwriting Agreement, dated June 22, 1992, between Silgan and Morgan
Stanley with respect to the 11-3/4% Notes (incorporated by reference
to Exhibit 3 filed with Silgan's Current Report on Form 8-K dated July
15, 1992, Commission File No. 33-46499).
10.101 Containers Amended and Restated 1989 Stock Option Plan (incorporated
by reference to Exhibit 10.119 filed with Holdings' Annual Report on
Form 10-K for the year ended December 31, 1992, Commission File No.
33-28409).
10.102 Form of Containers Nonstatutory Restricted Stock Option and Stock
Appreciation Right Agreement (incorporated by reference to Exhibit
10.120 filed with Holdings' Annual Report on Form 10-K for the year
ended December 31, 1992, Commission File No. 33-28409).
10.103 Plastics Amended and Restated 1989 Stock Option Plan (incorporated by
reference to Exhibit 10.121 filed with Holdings' Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 33-
28409).
10.104 Form of Plastics Nonstatutory Restricted Stock Option and Stock
Appreciation Right Agreement (incorporated by reference to Exhibit
10.122 filed with Holdings' Annual Report on Form 10-K for the year
ended December 31, 1992, Commission File No. 33-28409).
10.105 Holdings Amended and Restated 1989 Stock Option Plan (incorporated by
reference to Exhibit 10.123 filed with Holdings' Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 33-
28409).
10.106 Holdings Nonstatutory Restricted Stock Option and Stock Appreciation
Right Agreement (incorporated by reference to Exhibit 10.124 filed
with Holdings' Annual Report on Form 10-K for the year ended December
31, 1992, Commission File No. 33-28409).
10.107 Purchase Agreement, dated as of September 3, 1993, between Containers
and Del Monte (incorporated by reference to Exhibit 1 filed with
Holdings' Current Report on Form 8-K, dated January 5, 1994,
Commission File No. 33-28409).
10.108 Amendment to Purchase Agreement, dated as of December 10, 1993,
between Containers and Del Monte (incorporated by reference to Exhibit
2 filed with Holdings' Current Report on Form 8-K, dated January 5,
1994, Commission File No. 33-28409).
10.109 Amended and Restated Organization Agreement, dated as of December 21,
1993, among R. Philip Silver, D. Greg Horrigan, MSLEF II, BTNY, First
Plaza and Holdings (incorporated by reference to Exhibit 2 filed with
Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission
File No. 33-28409).
10.110 Stockholders Agreement, dated as of December 21, 1993, among R. Philip
Silver, D. Greg Horrigan, MSLEF II, BTNY, First Plaza and Holdings
(incorporated by reference to Exhibit 3 filed with Holdings' Current
Report on Form 8-K, dated March 25, 1994, Commission File No. 33-
28409).
10.111 Amended and Restated Management Services Agreement, dated as of
December 21, 1993, between S&H and Holdings (incorporated by reference
to Exhibit 4 filed with Holdings' Current Report on Form 8-K, dated
March 25, 1994, Commission File No. 33-28409).
10.112 Amended and Restated Management Services Agreement, dated as of
December 21, 1993, between S&H and Silgan (incorporated by reference
to Exhibit 5 filed with Holdings' Current Report on Form 8-K, dated
March 25, 1994, Commission File No. 33-28409).
10.113 Amended and Restated Management Services Agreement, dated as of
December 21, 1993, between S&H and Containers (incorporated by
reference to Exhibit 6 filed with Holdings' Current Report on Form 8-
K, dated March 25, 1994, Commission File No. 33-28409).
10.114 Amended and Restated Management Services Agreement, dated as of
December 21, 1993, between S&H and Plastics (incorporated by reference
to Exhibit 7 filed with Holdings' Current Report on Form 8-K, dated
March 25, 1994, Commission File No. 33-28409).
10.115 Stock Purchase Agreement, dated as of December 21, 1993, between
Holdings and First Plaza (incorporated by reference to Exhibit 8 filed
with Holdings' Current Report on Form 8-K, dated March 25, 1994,
Commission File No. 33-28409).
10.116 Credit Agreement, dated as of December 21, 1993, among Silgan,
Containers, Plastics, the lenders from time to time party thereto,
Bank of America, as co-agent, and Bankers Trust, as agent
(incorporated by reference to Exhibit 9 filed with Holdings' Current
Report on Form 8-K, dated March 25, 1994, Commission File No. 33-
28409).
10.117 Amended and Restated Holdings Guaranty, dated as of December 21, 1993,
made by Holdings (incorporated by reference to Exhibit 10 filed with
Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission
File No. 33-28409).
10.118 Amended and Restated Borrowers Guaranty, dated as of December 21,
1993, made by Silgan, Containers, Plastics and California-Washington
Can Corporation (incorporated by reference to Exhibit 11 filed with
Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission
File No. 33-28409).
10.119 Supply Agreement, dated as of September 3, 1993, between Containers
and Del Monte (incorporated by reference to Exhibit 10.118 filed with
Silgan's Annual Report on Form 10-K for the year ended December 31,
1993, Commission File No. 1-11200). (Portions of this Exhibit are
subject to an application for confidential treatment filed with the
Commission.)
10.120 Amendment to Supply Agreement, dated as of December 21, 1993, between
Containers and Del Monte (incorporated by reference to Exhibit 10.119
filed with Silgan's Annual Report on Form 10-K for the year ended
December 31, 1993, Commission File No. 1-11200). (Portions of this
Exhibit are subject to an application for confidential treatment filed
with the Commission.)
*22 Subsidiaries of the Registrant.
(b) Reports on Form 8-K:
None.
* Filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SILGAN HOLDINGS INC.
Date: March 29, 1994 By /s/ R. Philip Silver
----------------------------
R. Philip Silver
Chairman of the Board and
Co-Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature Title Date
Chairman of the Board and
Co-Chief Executive Officer
/s/ R. Philip Silver (Principal Executive Officer) March 29, 1994
- ------------------------------
(R. Philip Silver)
/s/ D. Greg Horrigan President, Co-Chief Executive March 29, 1994
- ------------------------------ Officer and Director
(D. Greg Horrigan)
Vice President, Assistant
/s/ James S. Hoch Secretary and Director March 29, 1994
- ------------------------------
(James S. Hoch)
Vice President, Assistant
/s/ Robert H. Niehaus Secretary and Director March 29, 1994
- ------------------------------
(Robert H. Niehaus)
Executive Vice President,
Chief
/s/ Harley Rankin, Jr. Financial Officer and March 29, 1994
- ------------------------------ Treasurer
(Harley Rankin, Jr.) (Principal Financial Officer)
Vice President, Controller and
Assistant Treasurer
/s/ Harold J. Rodriguez, Jr. (Principal Accounting Officer)March 29, 1994
- ------------------------------
(Harold J. Rodriguez, Jr.)
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Silgan Holdings Inc.
We have audited the accompanying consolidated balance sheets of Silgan
Holdings Inc. as of December 31, 1993 and 1992, and the related
consolidated statements of operations, deficiency in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1993. Our audits also included the financial statement schedules listed in
the index at Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Silgan Holdings Inc. at December 31, 1993 and 1992, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
As discussed in Note 2 to the consolidated financial statements, in
1993, the Company changed its method of accounting for postretirement
benefits other than pensions, income taxes and postemployment benefits.
Ernst & Young
Stamford, CT
March 10, 1994
F-1
SILGAN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1993 and 1992
(Dollars in thousands)
ASSETS 1993 1992
Current assets:
Cash and cash equivalents $ 224 $ 2,887
Accounts receivable, less allowances for
doubtful accounts of $1,084 and $1,643 for
1993 and 1992, respectively 44,409 44,557
Inventories 108,653 75,007
Prepaid expenses and other current assets 3,676 4,052
Total current assets 156,962 126,503
Property, plant and equipment, at cost:
Land 4,469 3,743
Buildings and improvements 56,087 50,382
Machinery and equipment 352,409 270,845
Construction in progress 19,894 15,334
432,859 340,304
Less accumulated depreciation and amortization (142,464) (116,425)
Net property, plant and equipment 290,395 223,879
Other assets 50,276 38,653
$497,633 $389,035
See accompanying notes.
F-2
SILGAN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1993 and 1992
(Dollars in thousands)
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY 1993 1992
Current liabilities:
Working capital loans $ 2,200 $ 40,400
Current portion of term loans 20,000 20,899
Trade accounts payable 31,913 27,956
Accrued payroll and related costs 20,523 19,242
Accrued interest payable 783 1,067
Accrued expenses and other current liabilities 21,385 14,977
Total current liabilities 96,804 124,541
Term loans 120,000 21,681
Senior secured notes 50,000 50,000
11 3/4% Senior subordinated notes 135,000 135,000
13 1/4% Senior discount debentures 200,718 176,551
Deferred income taxes 6,836 5,788
Other long-term liabilities 33,242 13,458
Class A common stock, $0.01 par value, subject to
put option, valued at fair market value, 500,000
shares authorized, 417,500 shares issued and
outstanding (Note 14) 25,050 14,613
Deficiency in stockholders' equity:
Common stock $0.01 par value:
Class B: 667,500 shares authorized, 667,500
and 417,500 shares issued and outstanding in
1993 and 1992, respectively. 7 4
Class C: 1,000,000 shares authorized, 50,000
shares issued and outstanding 1 1
Additional paid-in capital 33,606 18,609
Accumulated deficit (203,631) (171,211)
Total deficiency in stockholders' equity (170,017) (152,597)
$497,633 $389,035
See accompanying notes.
F-3
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Net sales $645,468 $630,039 $678,211
Cost of goods sold 571,174 554,972 605,185
Gross profit 74,294 75,067 73,026
Selling, general and
administrative expenses 32,460 32,784 34,129
Income from operations 41,834 42,283 38,897
Interest expense and other
related financing costs 54,265 57,091 55,996
Minority interest expense - 2,745 3,889
Other (income) expense 35 25 (396)
Loss before income taxes (12,466) (17,578) (20,592)
Income tax provision (Note 8) 1,900 2,200 -
Loss before extraordinary
charges and cumulative effects of
changes in accounting principles (14,366) (19,778) (20,592)
Extraordinary charges relating to
early extinguishment of debt (1,341) (23,597) -
Cumulative effect of changes in accounting
principles (Notes 2, 8 & 16) (6,276) - -
Net loss $(21,983) $(43,375) $(20,592)
See accompanying notes.
F-4
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Total
Class B & C Additional deficiency in
Common paid-in Accumulated stockholders'
stock capital (deficit) equity
Balance at December 31, 1990 $ 5 $18,609 $(107,244) $(88,630)
Net loss - - (20,592) (20,592)
Balance at December 31, 1991 5 18,609 (127,836) (109,222)
Net loss - - (43,375) (43,375)
Balance at December 31, 1992 5 18,609 (171,211) (152,597)
Issuance of 250,000 shares
of Class B Common Stock 3 14,997 - 15,000
Adjustment to the fair market
value of the Class A Common
Stock subject to put option
(Note 14) - - (10,437) (10,437)
Net loss - - (21,983) (21,983)
Balance at December 31, 1993 $ 8 $ 33,606 $(203,631) $(170,017)
See accompanying notes.
F-5
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Cash flows from operating activities:
Net loss $ (21,983) $(43,375) $(20,592)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation 31,607 29,538 30,019
Amortization 5,488 5,097 4,712
Accretion of discount on discount
debentures 24,167 11,116 -
Minority interest expense - 2,745 3,889
Interest on senior reset debentures
to be paid in additional debentures - - 25,505
Other items 342 1,215 324
Extraordinary charges relating
to early extinguishment of debt 1,341 23,597 -
Cumulative effect of changes in
accounting principles 6,276 - -
Changes in assets and liabilities,
net of effect of acquisitions:
(Increase) decrease in accounts
receivable 707 (8,705) 23,539
(Increase) decrease in inventories (4,316) 5,541 8,471
Increase (decrease) in trade
accounts payable 3,757 (4,330) (10,448)
Other, net 749 (6,999) (4,260)
Total adjustments 70,118 58,815 81,751
Net cash provided by operating
activities 48,135 15,440 61,159
Cash flows from investing activities:
Acquisition of Del Monte Can
Manufacturing Assets (73,865) - -
Capital expenditures (42,480) (23,447) (21,834)
Proceeds from sale of assets 262 429 12,028
Net cash used in investing activities (116,083) (23,018) (9,806)
Continued on following page.
F-6
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Cash flows from financing activities:
Borrowings under working capital loans 328,050 316,050 357,560
Repayments under working capital loans (366,250) (296,850) (372,960)
Repayment of term loans (42,580) (40,205) (36,507)
Proceeds from issuance of term loans 140,000 - -
Proceeds from issuance of common stock 15,000 - -
Proceeds from issuance of senior
secured notes - 50,000 -
Proceeds from issuance of
11 3/4% senior subordinated notes - 135,000 -
Proceeds from issuance of 13 1/4%
senior discount debentures - 165,435 -
Redemption of 14% senior
subordinated notes - (89,250) -
Redemption of Silgan preferred stock - (31,508) -
Redemption of senior reset debentures - (181,588) -
Cash dividends paid on Silgan
preferred stock - (1,137) -
Debt financing costs (8,935) (17,300) -
Net cash provided (used) by
financing activities 65,285 8,647 (51,907)
Net increase (decrease) in cash and
cash equivalents (2,663) 1,069 (554)
Cash and cash equivalents at
beginning of year 2,887 1,818 2,372
Cash and cash equivalents at
end of year $ 224 $ 2,887 $ 1,818
Supplementary data:
Interest paid $ 25,733 $ 46,757 $ 27,503
Income taxes paid, net of refunds 722 1,206 764
See accompanying notes.
F-7
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
1. Basis of Presentation
Silgan Holdings Inc. ("Holdings", together with its wholly owned
subsidiary, "the Company"), a company controlled by Silgan management and
Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II"), an affiliate of
Morgan Stanley & Co. Incorporated ("MS & Co."), own all the outstanding
common stock of Silgan Corporation ("Silgan"). Silgan has two operating
subsidiaries, Silgan Containers Corporation ("Containers") and Silgan
Plastics Corporation ("Plastics").
The Company is engaged in the packaging business which includes the
manufacture and sale of steel, aluminum and paperboard containers, mainly
to processors and packagers of food products, and the design, manufacture
and sale of various plastic containers, mainly for food, beverage,
household, pharmaceutical and personal care products.
2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions have been
eliminated. Assets and liabilities of the Company's foreign subsidiary are
translated at rates of exchange in effect at the balance sheet date.
Income amounts are translated at the average of monthly exchange rates.
Accounts Receivable
Accounts receivable consist primarily of amounts due from domestic
companies. Credit is extended based on an evaluation of the customer's
financial condition and collateral is not generally required. The Company
maintains an allowance for doubtful accounts at a level which management
believes is sufficient to cover potential credit losses.
Inventories
Inventories are stated at the lower of cost or market (net realizable
value). Finished goods, work-in-process and raw material inventories are
principally accounted for by the last-in, first-out method (LIFO).
Property, plant and equipment
Property, plant and equipment are recorded at cost and are depreciated on
the straight-line method over their estimated useful lives (ranging from 3
to 25 years). Maintenance and repair expenditures are charged to expense
as incurred; major renewals and betterments are capitalized. The total
amount of repairs and maintenance expense for the years ended December 31,
1993, 1992 and 1991 was $17,072, $14,962 and $16,507, respectively.
F-8
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
2. Summary of Significant Accounting Policies (continued)
Other Assets
Cost in excess of fair value of net assets acquired is amortized on a
straight-line basis over a period not exceeding forty years. Covenants not
to compete are being amortized over five years. Debt issuance costs are
being amortized over the terms of the related debt agreements (3 to 10
years).
Cash flows
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with a maturity of three months or
less at the time of purchase and investments in money market accounts to be
cash equivalents.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Short and long-term debt: The carrying amounts of the Company's borrowings
under its working capital loans and variable-rate borrowings approximate
their fair value. The fair values of fixed-rate borrowings are based on
quoted market prices.
Letters of Credit: Fair values of the Company's outstanding letters of
credit are based on current contractual amounts outstanding.
Adoption of New Accounting Policies
Postretirement Benefits Other than Pensions: Effective January 1, 1993,
the Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions". Under SFAS No. 106, the Company is required to accrue the
estimated cost of retiree health and other postretirement benefits during
the years that covered employees render service. Prior to 1993, the
Company recorded these benefits on the pay-as-you-go basis. As permitted
by the Statement, prior years' financials have not been restated. There is
no tax effect of the cumulative charge due to the net operating loss
position of the Company. See Note 16 - Postretirement Benefits Other than
Pensions.
F-9
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
2. Summary of Significant Accounting Policies (continued)
Income Taxes: Effective January 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 requires the use of the
liability method of accounting for deferred income taxes. The provision
for income taxes includes federal, state and foreign income taxes currently
payable and those deferred because of temporary differences between the
financial statement and tax bases of assets and liabilities. The Company
had previously reported under SFAS No. 96, "Accounting for Income Taxes".
There was no effect for the difference in methods at the date of adoption.
See Note 8 - Income Taxes.
Postemployment Benefits: During 1993, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". The cumulative effect
as of January 1, 1993 of this accounting change was to decrease net income
by $1,276. There was no tax effect of the charge due to the net operating
loss position of the Company. There was no effect on income before income
taxes as a result of this change in accounting principle.
3. Acquisitions
On December 21, 1993, Containers acquired from Del Monte Corporation ("Del
Monte") substantially all of the fixed assets and certain working capital
of its container manufacturing business in the United States ("DM Can").
The purchase price, which is subject to post-closing adjustments, for the
assets acquired and the assumption of certain specified liabilities,
including related transaction costs, was $73,865. The acquisition was
accounted for as a purchase transaction and the results of operations have
been included with the Company's results from the acquisition date. The
total purchase cost was allocated first to the tangible assets acquired and
liabilities assumed based upon their respective fair values as determined
from preliminary appraisals and valuations and the excess was allocated to
cost over fair value of assets acquired. The aggregate purchase cost and
its preliminary allocation to the assets and liabilities is as follows:
Net working capital acquired $26,400
Property, plant and equipment 57,238
Cost in excess of fair value of assets acquired 6,587
Other liabilities assumed (16,360)
$73,865
Set forth below is the Company's summary unaudited pro forma results of
operations for the years ended December 31, 1993 and 1992. The unaudited
pro forma results of operations for the year ended December 31, 1993
include the historical results of DM Can for the period ended December 21,
1993 and give effect to the pro forma adjustments. The unaudited pro forma
results of operations for the year ended December 31, 1992 include the
historical results of DM Can and the Company for the year ended December
31, 1992 and give effect to the pro forma adjustments.
F-10
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
3. Acquisitions (continued)
The pro forma adjustments to the historical results of operations reflect
the sales prices set forth in a supply agreement with Del Monte, the
estimated effect of purchase accounting adjustments based upon preliminary
appraisals and evaluations, the financing of the acquisition and certain
other adjustments as if these events had occurred as of the beginning of
the periods mentioned therein. The following unaudited pro forma results
of operations do not purport to represent what the Company's results of
operations would actually have been had the transactions in fact occurred
on the dates indicated or to project the Company's results for any future
period:
1993 1992
Net sales $818,614 $819,579
Income from operations 50,669 56,747
Loss before income taxes (8,134) (8,102)
Loss before extraordinary charges
and cumulative effect of accounting changes (10,380) (11,060)
Net loss (17,997) (34,657)
4. Dispositions
In November 1991 the Company sold substantially all of the assets used in
its PET carbonated beverage bottle business. Most of the sales proceeds of
$12,000 were used to repay term loans. No gain or loss was recognized as a
result of the disposition.
5. Refinancings
1993
Effective December 21, 1993, Silgan, Containers and Plastics entered into a
credit agreement (the "Credit Agreement") with certain lenders (the
"Banks"), Bank of America, as Co-Agent, and Bankers Trust, as Agent, to
refinance in full all amounts owing under the Amended and Restated Credit
Agreement, dated as of August 31, 1987, and to finance the acquisition of
DM Can by Containers. Under the Credit Agreement, the Banks loaned the
Company $140,000 of term loans and $29,800 of working capital loans on the
effective date. In addition, the Company issued and sold 250,000 shares of
its Class B Common Stock for $15,000. The Company used these proceeds to
repay $41,452 of term loans and $60,800 of working capital loans, to
acquire DM Can and pay fees and expenses. As a result of the early
extinguishment of debt, the Company incurred a charge of $1,341. There was
no tax effect of this charge due to the net operating loss position of the
Company. See Note 9 - Bank Credit Facility.
F-11
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
5. Refinancings (continued)
1992
Effective June 29, 1992, Holdings and Silgan refinanced a significant
portion of their indebtedness (the "Refinancing"). The Refinancing
included a private placement by Silgan of $50,000 principal amount of its
Senior Secured Floating Rate Notes due June 30, 1997 (the "Secured Notes"),
a public offering of $135,000 principal amount of Silgan's 11 3/4% Senior
Subordinated Notes due 2002 (the "11 3/4% Notes") and a public offering by
Holdings of its 13 1/4% Senior Discount Debentures due 2002 (the " Discount
Debentures") for proceeds of $165,435. The aggregate proceeds from the new
debt offerings of $350,435, less $17,300 of transaction fees and expenses,
were used, in part, to redeem Silgan's 14% Senior Subordinated Notes
(the "14% Notes"), Silgan's 15% Cumulative Exchangeable Redeemable
Preferred Stock (the "Preferred Stock") and Holdings' Senior Reset
Debentures due 2004 (the "Holdings Reset Debentures"). The Preferred Stock
(300,083 shares) was redeemed on August 16, 1992 at a redemption price of
$105 per share plus accrued dividends. The 14% Notes ($85,000 aggregate
principal amount) were redeemed on August 28, 1992 at a redemption price of
105% of the principal amount thereof plus accrued interest. The Holdings
Reset Debentures were redeemed on July 29, 1992 ($175,160 aggregate
principal amount) at a redemption price of 103.67% of the principal amount
thereof plus accrued interest. In addition, the Company paid cash interest
of $15,326 at a rate of 17 1/2% on the principal amount of the Holdings
Reset Debentures for the period January 1, to June 30, 1992.
In conjunction with the Refinancing, Silgan's Amended and Restated Credit
Agreement was amended to, among other things, permit the Refinancing and
the Company repaid $30,000 of term loans thereunder.
As a result of the Refinancing, unamortized deferred financing costs
relating to the 14% Notes, the Preferred Stock, the repayment of term loans
under the Amended and Restated Credit Agreement and Holdings Reset
Debentures totaling $11,034 in the aggregate were written off in 1992 and,
along with the redemption premiums of $12,563, are reflected as an
extraordinary charge. There was no tax effect on this charge due to the
net operating loss position of the Company.
F-12
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
6. Inventories
Inventories at December 31, 1993 and 1992 consist of the following:
1993 1992
Raw materials and supplies $ 26,458 $ 17,623
Work-in-process 17,105 10,413
Finished goods 65,072 49,546
108,635 77,582
Adjustment to value inventory
at cost on the LIFO method 18 (2,575)
$108,653 $ 75,007
The amount of inventory recorded on the first-in first-out method at
December 31, 1993 and 1992 was $2,178 and $2,189, respectively.
7. Other Assets
Other assets at December 31, 1993 and 1992 consist of the following:
1993 1992
Cost in excess of fair value of
assets acquired $ 26,671 $ 20,178
Debt issuance costs 25,213 24,079
Covenants not to compete 8,500 8,500
Other 3,539 596
63,923 53,353
Less: accumulated amortization (13,647) (14,700)
$ 50,276 $ 38,653
In 1993, upon the effectiveness of the Credit Agreement, the Company wrote
off $1,341 of net debt issuance costs, which has been classified as an
extraordinary charge, and capitalized $8,935 in new debt issuance costs.
In 1992, as part of the Refinancing, the Company wrote off $11,034 of net
debt issuance costs and capitalized $17,300 in new debt issuance costs.
Amortization expense for the years ended December 31, 1993 and 1992 was
$5,488 and $5,097, respectively.
8. Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes" which requires the use of the liability method of
accounting for deferred income taxes. The Company had previously reported
under SFAS No. 96, "Accounting for Income Taxes". There was no effect for
the difference in methods at the date of adoption.
F-13
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
8. Income Taxes (continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
at December 31, 1993 are as follows:
1993
Deferred tax liabilities:
Tax over book depreciation $20,700
Book over tax basis of assets acquired 24,000
Other 3,600
Total deferred tax liabilities 48,300
Deferred tax assets:
Book reserves not yet deductible
for tax purposes 20,700
Deferred interest on high yield obligations 12,300
Net operating loss carryforwards 37,300
Other 3,400
Total deferred tax assets 73,700
Valuation allowance for deferred tax assets 32,236
Net deferred tax assets 41,464
Net deferred tax liabilities $ 6,836
The income tax provision consists of the following:
1993 1992 1991
Current
Federal $ 300 $ - $ -
State 1,900 1,705 682
Foreign (400) 31 380
1,800 1,736 1,062
Deferred:
Federal - - (1,500)
State 100 464 438
Foreign - - -
100 464 (1,062)
$1,900 $2,200 $ -
F-14
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
8. Income Taxes (continued)
The aggregate income tax provision varied from that computed by using the
U.S. statutory rate as a result of the following:
1993 1992 1991
Income tax benefit at
the U.S. federal
income tax rate $(4,363) $(5,977) $(7,001)
State and foreign tax expense
net of federal income taxes 1,235 1,452 990
Nondeductible items:
Amortization of goodwill 154 154 154
Minority interest expense - 933 1,322
Losses for which no benefit
is available 4,874 5,638 4,535
$ 1,900 $ 2,200 $ -
The Company files a consolidated federal income tax return. At December 31,
1993, the Company had net operating loss carryforwards at December 31, 1993
of approximately $105,000 which are available to offset future consolidated
taxable income of the group and expire from 2001 through 2008. At December
31, 1993, the Company had an alternative minimum tax liability of $300 and
approximately $1,900 of alternative minimum tax credits which are available
indefinitely to reduce future tax payments for regular federal income tax
purposes.
9. Bank Credit Facility
On December 21, 1993, Silgan, Containers and Plastics (the "Borrowers") and
the Banks entered into the Credit Agreement pursuant to which the Banks
loaned to Silgan (i) $60,000 of term loans (the "A Term Loans") and (ii)
$80,000 of term loans (the "B Term Loans"), collectively, the "Term Loans",
and agreed to lend to Containers or Plastics up to an aggregate of $70,000
of working capital loans (the "Working Capital Loans"). Concurrent with
the borrowings under the Credit Agreement, the Company repaid in full
amounts outstanding under the Amended and Restated Credit Agreement. See
Note 5 - Refinancings.
F-15
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
9. Bank Credit Facility (continued)
To secure the obligations of Borrowers under the Credit Agreement, Silgan
has pledged to the Banks principally all of the capital stock of its
subsidiaries and the subsidiaries have each granted to the Banks security
interests in substantially all of their respective real and personal
property. Such collateral also secures on an equal and ratable basis the
Secured Notes, subject to certain intercreditor arrangements. Holdings has
pledged to the Banks all of the capital stock of Silgan. Holdings and each
of the Borrowers have guaranteed on a secured basis all of the obligations
of the Borrowers under the Credit Agreement.
The A Term Loans mature on September 15, 1996 and are payable in
installments during the listed years as follows:
A Term Loan
Installment Repayment Date Principal Amount
1994 $ 20,000
1995 20,000
1996 20,000
The B Term Loans mature and are payable in full on September 15, 1996.
Amounts repaid under the Term Loans cannot be reborrowed.
Under the Credit Agreement, Silgan is required to repay the Term Loans (pro
rata for each tranche of Term Loans) in an amount equal to 75% of the
Company's Excess Cash Flow (as defined in the Credit Agreement) in any
fiscal year during the Credit Agreement (beginning with the 1994 fiscal
year). Additionally, Silgan is required to repay the Term Loans (pro rata
for each tranche of Term Loans) and the Secured Notes, in an aggregate
amount equal to 80% of the net sale proceeds from certain assets sales and
100% of the net equity proceeds from certain sales of equity, all as
provided in the Credit Agreement and the Secured Notes Agreement.
The aggregate amount of Working Capital Loans which may be outstanding at
any time is subject to a borrowing base limitation of the sum of (i) 85% of
eligible accounts receivable of Containers and Plastics and (ii) 50% of
eligible inventory of Containers and Plastics. In lieu of Working Capital
Loans, Containers and Plastics may request Bankers Trust to issue up to
$15,000 of letters of credit (the "Letters of Credit"). At December 31,
1993, $6,094 of Letters of Credit were outstanding.
Subject to the terms of the Credit Agreement, the Working Capital Loans can
be borrowed, repaid and reborrowed from time to time until September 15,
1996, on which date all Working Capital Loans mature and are payable in
full.
F-16
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
9. Bank Credit Facility (continued)
Each of the Term Loans and each of the Working Capital Loans, at the
respective Borrower's election, consist of loans designated as Eurodollar
rate loans or as Base Rate loans. Subject to certain conditions, each of
the Term Loans and each of the Working Capital Loans can be converted from
a Base Rate loan into a Eurodollar rate loan and vice versa. The term
"Base Rate" means the highest of (i) 1/2 of 1% in excess of the Adjusted
Certificate of Deposit Rate (as defined in the Credit Agreement), (ii) 1/2
of 1% in excess of the Federal Funds Rate (as defined in the Credit
Agreement) and (iii) Bankers Trust's prime lending rate.
Interest on Term Loans maintained as Base Rate loans accrues at floating
rates of 1.75% (in the case of A Term Loans) and 2.25% (in the case of B
Term Loans) over the Base Rate. Interest on Term Loans maintained as
Eurodollar rate loans accrues at floating rates of 2.75% (in the case of A
Term Loans) and 3.25% (in the case of B Term Loans) over a formula rate
(the "Eurodollar Rate") determined with reference to the rate offered by
Bankers Trust for dollar deposits in the New York interbank Eurodollar
market. Interest on Working Capital Loans maintained as (i) Base Rate
loans accrues at floating rates of 2% over the Base Rate or (ii) Eurodollar
rate loans accrues at floating rates of 3% over the Eurodollar Rate. At
December 31, 1993, the loans were maintained as Base Rate loans and the
interest rate was between 7 3/4% and 8 1/4%.
Each of Containers and Plastics has agreed to jointly and severally pay to
the Banks, on a quarterly basis, a commitment commission calculated as
0.50% per annum on the daily average unused portion of the Banks' working
capital commitment in respect of the Working Capital Loans until such
working capital commitment is terminated. Additionally, Containers and
Plastics are required to pay to Bankers Trust, on a quarterly basis in
arrears, a letter of credit fee of 3.0% per annum and a facing fee of 1/4
of 1% per annum, each on the average daily stated amount of each letter of
credit issued for the account of Containers or Plastics, respectively.
The Credit Agreement requires Silgan to meet certain financial covenants,
and restricts or limits, among other items, each of the Borrowers' ability
to (i) incur additional indebtedness, (ii) create certain liens, (iii)
consolidate, merge or sell assets, (iv) make capital expenditures and (v)
pay dividends, except for distributions to Holdings to fund federal and
state tax obligations.
For 1993, 1992 and 1991, respectively, the average amount of borrowings
under the Working Capital Loans was $51,935, $44,525, and $56,342; the
average annual interest rate was 6.5%, 7.2% and 9.0%; and the highest
amount of such borrowings at any month-end was $80,250, $80,800 and
$81,300.
F-17
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
10. Senior Secured Notes
The Secured Notes constitute senior indebtedness of Silgan and are secured
by a first lien on substantially all of the assets of Silgan. Such
collateral also secures on an equal and ratable basis, subject to certain
intercreditor arrangements, all indebtedness of Silgan under the Credit
Agreement. The Secured Notes mature on June 30, 1997 and bear interest,
which is payable quarterly, at a rate of three-month LIBOR plus 3%. The
interest rate is adjusted quarterly. The interest rate in effect at
December 31, 1993 was 6.38%.
The Secured Notes are redeemable at the option of Silgan at par plus
accrued and unpaid interest to the redemption date. Net cash proceeds from
certain asset sales and the issuance of capital stock by Silgan are
required to be applied to prepay the Secured Notes and indebtedness under
the Credit Agreement on a pro rata basis, subject to certain exceptions.
The Secured Notes contain covenants which are comparable to or less
restrictive than those required by the Credit Agreement. These covenants
limit, among other items, Silgan's ability to (i) incur additional
indebtedness, (ii) pay dividends, except for distributions to Holdings to
fund federal and state tax obligation, (iii) enter into certain
transactions with affiliates, (iv) repay subordinated indebtedness, and (v)
effect certain mergers, consolidations and transfers of assets.
11. 11 3/4% Senior Subordinated Notes
The 11 3/4% Notes, which mature on June 15, 2002, represent unsecured
general obligations of Silgan, subordinate in right of payment to
obligations of the Company under the Credit Agreement and the Secured Notes
and effectively subordinate to all of the obligations of the subsidiaries
of Silgan. Interest is payable semi-annually on June 15 and December 15.
The 11 3/4% Notes are redeemable at the option of Silgan, in whole or in
part, at any time during the twelve months commencing June 15 of the
following years at the indicated percentages of their principal amount plus
accrued interest:
Redemption
Year Percentage
1997 105.8750%
1998 102.9375%
1999 and thereafter 100.0000%
The 11 3/4% Notes Indenture contains covenants which are comparable to or
less restrictive than those required by the Credit Agreement and the
Secured Notes.
The estimated fair value of the 11 3/4% Notes at December 31, 1993 was
$145,800.
F-18
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
12. 13 1/4% Senior Discount Debentures
On June 30, 1992, Holdings issued $275,000 principal amount of discount
Debentures for cash proceeds of $165,435. The Discount Debentures, which
are due on December 15, 2002, represent unsecured general obligations of
Holdings, subordinate in right of payment to the obligations of Silgan.
The original issue discount is being amortized through June 15, 1996 with a
yield to maturity of 13 1/4%. The carrying amount at December 31, 1993 of
the Discount Debentures represents the principal amount less an unamortized
discount of $74,282. From and after June 15, 1996, interest on the
Discount Debentures will accrue on the principal amount at the rate of 13
1/4% and be payable in cash semiannually. The Discount Debentures are
redeemable at any time, at the option of Holdings, in whole or in part, at
100% of their principal amount plus accrued interest to the redemption
date.
The Discount Debenture Indenture contains covenants which are comparable to
or less restrictive than those required by the Credit Agreement, the
Secured Notes and the 11 3/4% Notes.
The estimated fair value of the Discount Debentures at December 31, 1993
was $214,500.
13. Preferred Stock/Minority Interest
The minority interest represented shares of Preferred Stock issued by
Silgan. The Preferred Stockholders received cumulative preferential
dividends at the rate per annum of 15% per share calculated as a percentage
of $100. Dividends were, at the option of Silgan, paid in additional
shares of Preferred Stock. During 1992 and 1991, Silgan issued 21,301 and
38,173 shares of Preferred Stock at $100 per share, representing its
Preferred Stock dividend requirement for the two quarters ended May 15,
1992 and the four quarters ended November 15, 1991. A cash dividend
payment of $1,137 was made for the quarter ended August 15, 1992, at which
time the preferred stock was redeemed.
As of December 31, 1993, Silgan has authorized 1,000 shares of Preferred
Stock, of which, none is issued or outstanding.
14. Common Stock
During 1993, Holdings increased its authorized Class B Common Stock from
500,000 shares to 667,500 shares and on December 21, 1993, Holdings sold
250,000 shares of its Class B Common Stock for a purchase price of $60.00
per share and an aggregate purchase price of $15,000. Holdings contributed
the proceeds to Silgan in conjunction with the acquisition of DM Can. See
Note 3 - Acquisitions.
F-19
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
14. Common Stock (continued)
The rights privileges and powers of the Class A Common Stock and the Class
B Common Stock are identical, with shares of each class being entitled to
one vote on all matters to come before the stockholders of Holdings. The
Class C Common stockholders do not have voting rights except in certain
circumstances.
Pursuant to an organization agreement, each of the holders of the Class A
Common Stock, upon the death or permanent disablement of either of the
holders of the Class A Common Stock prior to June 30, 1994, have the right
to require Holdings to acquire all the shares held by the respective holder
or his affiliates at the then fair market value of the stock (as defined in
the Organization Agreement). In connection therewith the value of the
Class A Common Stock has been adjusted to fair market value. The increase
in the fair market value has been charged to accumulated deficit. At June
30, 1994, to the extent the put option has not been exercised, the
accumulated deficit will be decreased by the amount previously charged for
the put option liability.
15. Retirement Plans
The Company sponsors contributory and non-contributory pension and
retirement plans which cover substantially all employees, other than union
employees covered by multi-employer defined benefit pension plans under
collective bargaining agreements. The benefits are paid based on either a
career average, final pay or years of service formula. With respect to
certain hourly employees, pension benefits are provided for based on stated
amounts for each year of service. The Company funds the minimum amount
required under the Employee Retirement Income Security Act of 1974 with
certain employees contributing approximately 3% of their annual
compensation.
The provisions of SFAS No. 87, "Employers' Accounting for Pensions" require
recognition in the balance sheet of an additional minimum liability and
related intangible asset for pension plans with accumulated benefits in
excess of plan assets. At December 31, 1993, an additional liability of
$2,107 and an intangible asset of equal amount are reflected in the
consolidated balance sheet. The additional liability is principally the
result of the change in the assumed discount rate.
F-20
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
15. Retirement Plans (continued)
Based on the latest actuarial information available, the following table
sets forth the defined benefit plans funded status and amounts recognized
in the Company's balance sheets as of December 31:
1993 1992
Actuarial present value of
benefit obligations:
Vested benefit obligations $ 19,096 $ 13,543
Non-vested benefit obligations 1,100 970
Accumulated benefit obligations 20,196 14,513
Additional benefits due to
future salary levels 9,825 9,847
Projected benefit obligations 30,021 24,360
Plan assets at fair value 18,327 14,644
Projected benefit obligation
in excess of plan assets 11,694 9,716
Unrecognized actuarial gain (loss) 2 2,431
Unrecognized prior service costs (2,093) (2,218)
Additional minimum liability 2,107 114
Net pension liability $ 11,710 $10,043
The 1992 funded status amounts have been restated to reflect revisions in
actuarial computations. These revisions had no effect on the Company's net
pension liability.
In addition to amounts set forth above, the Company has assumed defined
benefit plan obligations of approximately $11,000 (as calculated at the
Company's discount rate of 7 1/2%) in connection with the acquisition of DM
Can. Under the terms of the DM Can purchase agreement, Del Monte will be
transferring to the Company fund assets of approximately $9,000 (as
calculated using a discount rate of 9%).
The assumptions used in determining actuarial present value of plan benefit
obligations as of December 31:
1993 1992 1991
Discount rate 7.5% 8.5% 8.5%
Weighted average rate of
compensation increase 4.5% 5.0 - 5.5% 5.0 - 5.5%
Expected long-term rate of
return on plan assets 8.5% 8.5% 8.5%
F-21
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
15. Retirement Plans (continued)
The components of total pension expense are as follows:
1993 1992 1991
Service cost $1,809 $1,722 $1,816
Interest cost 2,144 2,101 1,977
Net amortization and deferrals 500 75 1,298
Actual return on assets (1,784) (891) (1,717)
Other (gains) (183) (183) (307)
Net pension cost of defined
benefit plans 2,486 2,824 3,067
Multi-employer plans 2,210 2,159 2,041
Total pension expense $4,696 $4,983 $5,108
Plan assets are invested in money market funds, equity funds and bond
funds.
In 1991, the Company realized a curtailment gain of $2,500 due to a
reduction in the Company's work force. Such amount has not been reflected
in total pension expense above.
Containers sponsors a deferred incentive savings plan for eligible salaried
employees where contributions are provided if Containers meets certain
financial targets. The maximum aggregate amount of awards will not exceed
15% of the aggregate salaries of the participants in the Plan.
Contributions of $1,630, $1,730 and $1,700 were made for 1993, 1992 and
1991, respectively.
Plastics sponsors a savings and investment plan which is organized under
Section 401(k) of the Internal Revenue Code. Plastics' contributions to
the plan were $146, $147 and $149 in 1993, 1992 and 1991, respectively.
16. Postretirement Benefits Other than Pensions
As discussed in Note 2, the Company adopted SFAS No. 106 in 1993. The
Company has elected to immediately recognize a cumulative charge of $5,000
for this change in accounting principle which represents the accumulated
postretirement benefit obligation existing as of January 1, 1993. This
change in accounting principle, excluding the cumulative effect, decreased
pretax income for the year ended December 31, 1993 by approximately $478.
The postretirement benefit cost for 1992 and 1991, which was recorded on a
pay-as-you-go basis, has not been restated and was not material.
F-22
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
16. Postretirement Benefits Other than Pensions (continued)
The Company has defined benefit health care and life insurance plans that
provide postretirement benefits to certain employees. The plans are
contributory, with retiree contributions adjusted annually, and contain
cost sharing features including deductibles and coinsurance. The Company
does not fund the plans.
The following table presents the plan's funded status and amounts
recognized in the Company's balance sheet as of December 31, 1993:
Accumulated postretirement
benefit obligation:
Retirees $1,209
Fully eligible active plan participants 1,197
Other active plan participants 2,127
4,533
Plan assets at fair value -
Accumulated postretirement benefit
obligation in excess of plan assets 4,533
Unrecognized net gain or (loss) (462)
Unrecognized transition obligation -
Accrued postretirement benefit cost $4,071
Net periodic postretirement benefit cost for 1993 included the following
components:
Service cost $ 152
Interest cost 326
Net periodic postretirement benefit cost $ 478
F-23
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
16. Postretirement Benefits Other than Pensions (continued)
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%. The weighted average rate of
increase in future compensation levels was 4.5%. For measuring the
expected postretirement benefit obligation, the weighted-average annual
assumed rate of increase in the per capita cost of covered benefits (i.e.,
health care cost trend rate) principally used is 14% for 1994 (15% for
1993). This rate is assumed to decrease by 1% per year to an ultimate rate
of 6%. A 1% increase in the trend rate assumption would increase the
accumulated postretirement benefit obligation as of December 31, 1993 by
approximately $62 and increase the aggregate of the service and interest
cost components of the net periodic postretirement benefit cost for 1993 by
approximately $12. As of December 31, 1992, the plan's unfunded
accumulated postretirement benefit obligations for retirees and active
participants was $1,144 and $3,856, respectively.
17. Stock Option Plans
The Company, Containers and Plastics have established separate but
virtually identical stock option plans for their key employees pursuant to
which options to purchase shares of common stock of Holdings' and its
subsidiaries and stock appreciation rights ("SARs") may be granted.
Options granted under the plans may be either incentive stock options or
non qualified stock options. To date, all stock options granted have been
non qualified stock options. Under the plans, the Company has reserved
15,000 shares and Containers and Plastics have each reserved 1,200 shares
of their common stock in order to enable them to issue shares under the
plans. Both Containers and Plastics have 10,800 shares of $0.01 par value
common stock currently issued, all of which are owned by Silgan.
The SARs extend to all of the shares covered by the options and provide for
the payment by either Holdings, Containers or Plastics, as the case may be,
to the holders of the options an amount in cash or stock equal to the
excess of the proforma book value, as defined, of a share of common stock
(or in the event of a public offering, the fair market value of a share of
common stock) over the exercise price of the option with certain
adjustments for the portion of vested stock appreciation not paid at the
time of recapitalization in June, 1989. Holdings and its subsidiaries have
the right to repurchase, and employees have the right to require the
subsidiaries to repurchase, their common stock at the then proforma book
value, or market value as the case may be, should employees leave the
Company.
F-24
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
17. Stock Options Plans (continued)
At December 31, 1993, there were outstanding options for 15,000 shares
under the Holdings' Plan, 816 shares under the Containers' Plan and 300
shares under the Plastics' Plan. The exercise prices per share are $35 for
the Holdings' options, range from $2,122 to $2,456 for the Containers'
options and are $746 for the Plastics' options. There were 14,000 options,
528 options and 240 options exercisable at December 31, 1993 under the
Holdings', Containers' and Plastics' plans, respectively. The Company
incurred charges relating to the vesting and payment of benefits under the
stock option plans of $200 and $350 in 1993 and 1992, respectively (none in
1991).
The stock options and SARs generally become exercisable ratably over a five
year period.
In the event of a public offering of any of Holdings' capital stock or a
sale of Holdings to a third party, (i) the options granted by Containers
and Plastics pursuant to the plans, or (ii) any stock issued upon exercise
of such options issued by Containers and Plastics are convertible into
either stock options or common stock of Holdings. The conversion of such
options or shares will be based upon a valuation of Holdings and an
allocation of such value among the subsidiaries after giving affect to,
among other things, that portion of the outstanding obligation of Holdings
allocable to each such subsidiary.
18. Business Information
The Company is engaged in the packaging business. Its principal products
are metal and plastic containers. Net sales for its metal and plastic
containers were $445,871 and $186,319; $425,844 and $192,596; and $435,349
and $232,139 for the years ended December 31, 1993, 1992 and 1991,
respectively. Other sales amounted to $13,278, $11,599 and $10,723 for the
years ended December 31, 1993, 1992 and 1991, respectively.
One customer accounted for 34.1%, 36.5% and 32.2%, of net sales during the
years ended December 31, 1993, 1992 and 1991 respectively. At December 31,
1993 and 1992, 12.9% and 14.5%, respectively, of the accounts receivable
balance is due from this customer.
F-25
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
19. Related Party Transactions
Pursuant to various management services agreements (the "Management
Agreement") entered into between Holdings, Silgan, Containers, Plastics,
and S&H, Inc. ("S&H"), a company wholly owned by Messrs. Silver and
Horrigan, the Chairman of the Board and President of Holdings,
respectively, S&H provides Holdings and Silgan and its subsidiaries with
general management, supervision and administrative services (the
"Services"). In consideration for the Services, S&H receives a fee of
4.95% (of which 0.45% is payable to MS & Co.) of Holdings' consolidated
earnings before depreciation, amortization, interest and taxes ("EBDIT")
until EBDIT has reached the Scheduled Amount set forth in the Management
Agreement and 3.3% (of which 0.3% is payable to MS & Co.) after EBDIT has
exceeded the Scheduled Amount up to the Maximum Amount as set forth in the
Management Agreement, plus reimbursement for all related out-of-pocket
expenses. The total amount incurred for the years ended December 31, 1993,
1992 and 1991 was approximately $4,385, $4,225 and $4,027, respectively.
Included in accounts payable at December 31, 1993 and 1992, was
approximately $575 and $200, payable to S&H, respectively.
Under the terms of the Management Agreement, the Company agreed, subject to
certain exceptions, to indemnify S&H and any of its affiliates, officers,
directors, employees, subcontractors, consultants or controlling persons
against any loss or damage they may sustain arising in connection with the
Management Agreement.
In connection with the 1992 Refinancing, MS & Co. received as compensation
for its services as underwriter for the Secured Notes, the 11 3/4% Notes
and the Discount Debentures an aggregate of $11,500.
In connection with the Credit Agreement entered into in 1993, the Banks
(including Bankers Trust) received certain fees amounting to $8,100.
20. Commitments
The Company is committed under certain noncancelable operating leases for
office and plant facilities, equipment and automobiles. Minimum future
rental payments under these operating leases are:
1994 $8,960
1995 6,700
1996 5,829
1997 4,873
1998 3,606
Thereafter 9,44l
$39,409
Rental expense for the years ended December 31, 1993, 1992 and 1991 was
approximately $7,999, $7,977 and $8,102, respectively.
F-26
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
21. Litigation
On June 30, 1989, Holdings acquired all of the outstanding shares of the
Company for $6.50 per share (the "Merger"). In connection with the Merger,
two complaints were filed during 1989 in the Court of Chancery in the State
of Delaware (the "Court") by certain Silgan Class B Common Stockholders
against Silgan, Holdings, MS & Co., officers and directors.
The complaints allege, among other things, that certain defendants breached
their fiduciary duties under Delaware law to minority stockholders of
Silgan by engaging in unfair dealing, attempting to effect a merger at a
grossly inadequate price and distributing misleading proxy materials. The
complaints ask the Court, among other things, to rescind the Merger and/or
to grant to plaintiffs such damages, including rescissory damages, as are
found by the Court to be proven at trial. Additionally, each plaintiff
filed a petition for appraisal.
In 1991, the Court stayed one of the actions and related appraisal
proceeding based upon the seizure and placement into receivership of one
plaintiff. The Court lifted the stay of the action and appraisal
proceeding on March 30, 1992 and both the action and appraisal were
dismissed in February 1994 following settlement with the plaintiff. The
second action was voluntarily dismissed on January 29, 1992 without
prejudice to the right of the plaintiffs to reinstate the action at the
conclusion of the related appraisal proceeding. Discovery is proceeding in
the appraisal. The Court has set the week of May 9, 1994 for trial.
Additionally, a complaint was filed by parties who are limited partners of
The Morgan Stanley Leveraged Equity Fund, L.P. ("MSLEF") against a number
of defendants, including Silgan and Holdings. The complaint alleges that
Silgan and Holdings aided and abetted the general partners MSLEF in
breaching their fiduciary duties to the limited partners. The Court
dismissed all claims against Silgan and Holdings related to this action on
January 14, 1993, and subsequently upheld that dismissal after plaintiffs
filed a motion for reargument.
The defendants believe that there is no factual basis for the allegations
and claims contained in the complaints. Management also believes that the
lawsuits are without merit and they intend to defend the lawsuits
vigorously. In addition, management believes that the ultimate resolution
of these matters and the appraisal proceedings will not have a material
effect on the financial condition or results of operations of Silgan or
Holdings.
F-27
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
21. Litigation (continued)
In connection with the Merger and the litigation described above, as of
December 31, 1993 approximately $6,800 of the purchase price has not been
paid to certain former stockholders and such amount has been recorded by
the Company as a current liability.
Other than the actions mentioned above there are no other pending legal
proceedings, other than ordinary routine litigation incidental to the
business of the Company, to which the Company is a party or to which any of
its properties are subject.
F-28
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Silgan Corporation
We have audited the accompanying consolidated balance sheets of Silgan
Corporation as of December 31, 1993 and 1992, and the related consolidated
statements of operations, common stockholder's equity and cash flows for
each of the three years in the period ended December 31, 1993. Our audits
also included the financial statement schedules listed in the index at Item
14(a). These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Silgan Corporation at December 31, 1993 and 1992, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
As discussed in Note 2 to the consolidated financial statements, in
1993, the Company changed its method of accounting for postretirement
benefits other than pensions, income taxes and postemployment benefits.
Ernst & Young
Stamford, CT
March 10, 1994
F-29
SILGAN CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1993 and 1992
(Dollars in thousands)
ASSETS 1993 1992
Current assets:
Cash and cash equivalents $ 205 $ 2,672
Accounts receivable, less allowances for
doubtful accounts of $1,084 and $1,643 for
1993 and 1992, respectively 44,409 44,557
Inventories 108,653 75,007
Prepaid expenses and other current assets 3,562 3,354
Total current assets 156,829 125,590
Property, plant and equipment, at cost 432,859 340,304
Less accumulated depreciation and amortization (142,464) (116,425)
Net property, plant and equipment 290,395 223,879
Other assets 44,840 32,685
$492,064 $382,154
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Working capital loans $ 2,200 $ 40,400
Current portion of term loans 20,000 20,899
Trade accounts payable 31,913 27,956
Accrued payroll and related costs 20,523 19,242
Accrued interest payable 783 1,067
Accrued expenses and other current liabilities 11,094 6,217
Total current liabilities 86,513 115,781
Term loans 120,000 21,681
Senior secured notes 50,000 50,000
11 3/4% Senior subordinated notes 135,000 135,000
Deferred income taxes 13,017 11,970
Other long-term liabilities 34,731 14,947
Common stockholder's equity:
Common stock $0.01 par value:
Class A: 1,000 shares authorized, 1 share
issued and outstanding - -
Class B: 1,000 shares authorized, 1 share
issued and outstanding - -
Class C: 1,000 authorized, none outstanding - -
Additional paid-in capital (Note 8) 64,135 41,560
Retained earnings (deficit) (11,332) (8,785)
Total common stockholder's equity 52,803 32,775
$492,064 $382,154
See accompanying notes.
F-30
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Net sales $645,468 $630,039 $678,211
Cost of goods sold 571,174 554,972 605,185
Gross profit 74,294 75,067 73,026
Selling, general and
administrative expenses 31,786 32,249 33,619
Income from operations 42,508 42,818 39,407
Interest expense and other
related financing costs 27,928 26,916 28,981
Other (income) expense 35 25 (396)
Income before income taxes 14,545 15,877 10,822
Income tax provision (Note 9) 6,300 2,200 1,500
Income before extraordinary
charges and cumulative effects of
changes in accounting principles 8,245 13,677 9,322
Extraordinary charges relating to early
extinguishment of debt, net of taxes (841) (9,075) -
Cumulative effect of changes in accounting
principles, net of taxes (Notes 2, 9 & 15) (9,951) - -
Net income (loss) (2,547) 4,602 9,322
Preferred stock dividend requirements - 2,745 3,889
Net income (loss) applicable to
common stockholder $ (2,547) $ 1,857 $ 5,433
See accompanying notes.
F-31
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Total
Additional Retained common
Common paid-in Earnings stockholder's
stock capital (deficit) equity
Balance at December 31, 1990 $ - $41,560 $ (351) $41,209
Preferred stock dividend
requirements of Silgan - - (3,889) (3,889)
Net income - - 9,322 9,322
Balance at December 31, 1991 - 41,560 5,082 46,642
Preferred stock dividend
requirements of Silgan - - (2,745) (2,745)
Net income - - 4,602 4,602
Dividend to Parent - - (15,724) (15,724)
Balance at December 31, 1992 - 41,560 (8,785) 32,775
Capital contribution
by Parent - 15,000 - 15,000
Tax benefit realized
from Parent - 7,575 - 7,575
Net loss - - (2,547) (2,547)
Balance at December 31, 1993 $ - $ 64,135 $ (11,332) $ 52,803
See accompanying notes.
F-32
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Cash flows from operating activities:
Net income (loss) $ (2,547) $ 4,602 $ 9,322
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 31,607 29,538 30,019
Amortization 4,817 4,424 4,038
Other items 342 1,215 324
Contribution by Parent for federal
income tax provision 7,575 - -
Extraordinary charges relating
to early extinguishment of debt 1,341 9,075 -
Cumulative effect of changes in
accounting principles 6,276 - -
Changes in assets and liabilities,
net of effect of acquisitions:
(Increase) decrease in accounts
receivable 707 (8,705) 23,539
(Increase) decrease in inventories (4,316) 5,541 8,471
Increase (decrease) in trade
accounts payable 3,757 (4,330) (10,448)
Other, net (1,228) (7,000) (3,931)
Total adjustments 50,878 29,758 52,012
Net cash provided by operating
activities 48,331 34,360 61,334
Cash flows from investing activities:
Acquisition of Del Monte Can
Manufacturing Assets (73,865) - -
Capital expenditures (42,480) (23,447) (21,834)
Proceeds from sale of assets 262 429 12,028
Net cash used in investing activities (116,083) (23,018) (9,806)
Continued on following page.
F-33
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Cash flows from financing activities:
Borrowings under working capital loans 328,050 316,050 357,560
Repayments under working capital loans (366,250) (296,850) (372,960)
Repayment of term loans (42,580) (40,205) (36,507)
Proceeds from issuance of term loans 140,000 - -
Capital contribution by Parent 15,000 - -
Proceeds from issuance of senior
secured notes - 50,000 -
Proceeds from issuance of
11 3/4% senior subordinated notes - 135,000 -
Redemption of 14% senior
subordinated notes - (89,250) -
Redemption of preferred stock - (31,508) -
Repayment of advance from Parent - (25,200) -
Dividend to Parent - (15,724) -
Cash dividends paid on preferred stock - (1,137) -
Debt financing costs (8,935) (10,250) -
Net cash provided (used) by financing
activities 65,285 (9,074) (51,907)
Net increase (decrease) in cash and
cash equivalents (2,467) 2,268 (379)
Cash and cash equivalents at
beginning of year 2,672 404 783
Cash and cash equivalents at
end of year $ 205 $ 2,672 $ 404
Supplementary data:
Interest paid $ 25,733 $ 29,046 $ 27,503
Income taxes paid, net of refunds 722 1,206 764
Additional preferred stock issued
in lieu of dividend - 2,130 3,817
See accompanying notes.
F-34
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
1. Basis of Presentation
Silgan Corporation ("Silgan", together with its wholly owned subsidiaries,
Silgan Containers Corporation ("Containers") and Silgan Plastics
Corporation ("Plastics"), the "Company") is a wholly owned subsidiary of
Silgan Holdings Inc. ("Holdings" or "Parent"). Holdings is a company
controlled by Silgan management and Morgan Stanley Leveraged Equity Fund
II, L.P. ("MSLEF II"), an affiliate of Morgan Stanley & Co. Incorporated
("MS & Co.").
The Company is engaged in the packaging business which includes the
manufacture and sale of steel, aluminum and paperboard containers, mainly
to processors and packagers of food products, and the design, manufacture
and sale of various plastic containers, mainly for food, beverage,
household, pharmaceutical and personal care products.
2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions have been
eliminated. Assets and liabilities of the Company's foreign subsidiary are
translated at rates of exchange in effect at the balance sheet date.
Income amounts are translated at the average of monthly exchange rates.
Accounts Receivable
Accounts receivable consist primarily of amounts due from domestic
companies. Credit is extended based on an evaluation of the customer's
financial condition and collateral is not generally required. The Company
maintains an allowance for doubtful accounts at a level which management
believes is sufficient to cover potential credit losses.
Inventories
Inventories are stated at the lower of cost or market (net realizable
value). Finished goods, work-in-process and raw material inventories are
principally accounted for by the last-in, first-out method (LIFO).
Property, plant and equipment
Property, plant and equipment are recorded at cost and are depreciated on
the straight-line method over their estimated useful lives (ranging from 3
to 25 years). Maintenance and repair expenditures are charged to expense
as incurred; major renewals and betterments are capitalized. The total
amount of repairs and maintenance expense for the years ended December 31,
1993, 1992 and 1991 was $17,072, $14,962 and $16,507, respectively.
F-35
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
2. Summary of Significant Accounting Policies (continued)
Other Assets
Cost in excess of fair value of net assets acquired is amortized on a
straight-line basis over a period not exceeding forty years. Covenants not
to compete are being amortized over five years. Debt issuance costs are
being amortized over the terms of the related debt agreements (3 to 10
years).
Cash flows
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with a maturity of three months or
less at the time of purchase and investments in money market accounts to be
cash equivalents.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Short and long-term debt: The carrying amounts of the Company's borrowings
under its working capital loans and variable-rate borrowings approximate
their fair value. The fair values of fixed-rate borrowings are based on
quoted market prices.
Letters of Credit: Fair values of the Company's outstanding letters of
credit are based on current contractual amounts outstanding.
Adoption of New Accounting Policies
Postretirement Benefits Other than Pensions: Effective January 1, 1993,
the Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions". Under SFAS No. 106, the Company is required to accrue the
estimated cost of retiree health and other postretirement benefits during
the years that covered employees render service. Prior to 1993, the
Company recorded these benefits on the pay-as-you-go basis. As permitted
by the Statement, prior years' financials have not been restated. See Note
15 - Postretirement Benefits Other than Pensions.
F-36
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
2. Summary of Significant Accounting Policies (continued)
Income Taxes: Effective January 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 requires the use of the
liability method of accounting for deferred income taxes. The provision
for income taxes includes federal, state and foreign income taxes currently
payable and those deferred because of temporary differences between the
financial statement and tax bases of assets and liabilities. The Company
had previously reported under SFAS No. 96, "Accounting for Income Taxes".
Under SFAS No. 96, the Company had recognized a federal income tax benefit
from the tax losses of Holdings. Under SFAS No. 109, this benefit will be
reflected as a contribution to additional paid-in capital instead of as a
reduction of income tax expense. As permitted by the Statement, prior
years' financial statements have not been restated. See Note 9 - Income
Taxes.
Postemployment Benefits: During 1993, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". The cumulative effect
as of January 1, 1993 of this accounting change was to decrease net income
by $826 (after related income taxes of $450). There was no effect on
income before income taxes as a result of this change in accounting
principle.
3. Acquisitions
On December 21, 1993, Containers acquired from Del Monte Corporation ("Del
Monte") substantially all of the fixed assets and certain working capital
of its container manufacturing business in the United States ("DM Can").
The purchase price, which is subject to post-closing adjustments, for the
assets acquired and the assumption of certain specified liabilities,
including related transaction costs, was $73,865. The acquisition was
accounted for as a purchase transaction and the results of operations have
been included with the Company's results from the acquisition date. The
total purchase cost was allocated first to the tangible assets acquired and
liabilities assumed based upon their respective fair values as determined
from preliminary appraisals and valuations and the excess was allocated to
cost over fair value of assets acquired. The aggregate purchase cost and
its preliminary allocation to the assets and liabilities is as follows:
Net working capital acquired $26,400
Property, plant and equipment 57,238
Cost in excess of fair value of assets acquired 6,587
Other liabilities assumed (16,360)
$73,865
F-37
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
3. Acquisitions (continued)
Set forth below is the Company's summary unaudited pro forma results of
operations for the years ended December 31, 1993 and 1992. The unaudited
pro forma results of operations for the year ended December 31, 1993
include the historical results of DM Can for the period ended December 21,
1993 and give effect to the pro forma adjustments. The unaudited pro forma
results of operations for the year ended December 31, 1992 include the
historical results of DM Can and the Company for the year ended December
31, 1992 and give effect to the pro forma adjustments.
The pro forma adjustments to the historical results of operations reflect
the sales prices set forth in a supply agreement with Del Monte, the
estimated effect of purchase accounting adjustments based upon preliminary
appraisals and evaluations, the financing of the acquisition and certain
other adjustments as if these events had occurred as of the beginning of
the periods mentioned therein. The following unaudited pro forma results
of operations do not purport to represent what the Company's results of
operations would actually have been had the transactions in fact occurred
on the dates indicated or to project the Company's results for any future
period:
1993 1992
Net sales $818,614 $819,579
Income from operations 51,343 57,282
Income before income taxes 18,877 25,353
Income before extraordinary charges
and cumulative effect of accounting changes 10,844 22,301
Net income 52 13,226
4. Dispositions
In November 1991 the Company sold substantially all of the assets used in
its PET carbonated beverage bottle business. Most of the sales proceeds of
$12,000 were used to repay term loans. No gain or loss was recognized as a
result of the disposition.
F-38
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
5. Refinancings
1993
Effective December 21, 1993, Silgan, Containers and Plastics entered into a
credit agreement (the "Credit Agreement") with certain lenders (the
"Banks"), Bank of America, as Co-Agent, and Bankers Trust, as Agent, to
refinance in full all amounts owing under the Amended and Restated Credit
Agreement, dated as of August 31, 1987, and to finance the acquisition of
DM Can by Containers. Under the Credit Agreement, the Banks loaned the
Company $140,000 of term loans and $29,800 of working capital loans on the
effective date. In addition, Holdings contributed $15,000 to the Company.
The Company used these proceeds to repay $41,452 of term loans and $60,800
of working capital loans, to acquire DM Can and pay fees and expenses. As
a result of the early extinguishment of debt, the Company incurred a charge
of $841 (net of $500 of taxes). See Note 10 - Bank Credit Facility.
1992
Effective June 29, 1992, the Company and Holdings refinanced a significant
portion of their indebtedness (the "Refinancing"). The Refinancing
included a private placement by the Company of $50,000 principal amount of
its Senior Secured Floating Rate Notes due June 30, 1997 (the "Secured
Notes") and a public offering of $135,000 principal amount of the Company's
11 3/4% Senior Subordinated Notes due 2002 (the "11 3/4% Notes"). The
proceeds from the new debt offerings, net of $10,250 of transaction fees
and expenses, were used, in part, to redeem the Company's 14% Senior
Subordinated Notes (the "14% Notes") and 15% Cumulative Exchangeable
Redeemable Preferred Stock (the "Preferred Stock"). The Preferred Stock
(300,083 shares) was redeemed on August 16, 1992 at a redemption price of
$105 per share plus accrued dividends. The 14% Notes ($85,000 aggregate
principal amount) were redeemed on August 28, 1992 at a redemption price of
105% of the principal amount thereof plus accrued interest.
In conjunction with the Refinancing, the Amended and Restated Credit
Agreement was amended to, among other things, permit the Refinancing and
the Company repaid $30,000 of term loans thereunder. In addition, the
Company repaid the $25,200 advance from Holdings and advanced $16,000 to
Holdings. Upon completion of the redemption of the 14% Notes, the Company
paid a $15,724 dividend to Holdings which Holdings, along with additional
cash earned on its short term investments of proceeds received by it in
connection with the Refinancing, used to retire the outstanding advance to
the Company. Such payments to Holdings, along with the public offering by
Holdings of its 13 1/4% Senior Discount Debentures due 2002 (the "Discount
Debentures") for an aggregate amount of proceeds of $165,435, were used by
Holdings to redeem its Senior Reset Debentures due 2004 (the "Holdings
Reset Debentures") on July 29, 1992.
F-39
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
5. Refinancings (continued)
1992 (continued)
As a result of the Refinancing, unamortized deferred financing costs
elating to the 14% Notes, the Preferred Stock and the repayment of term
loans under the Amended and Restated Credit Agreement totaling $3,325 in
the aggregate were written off in 1992 and, along with the redemption
premiums of $5,750, are reflected as an extraordinary charge. Since the
Company was reporting under SFAS No. 96, there was no tax effect on this
charge due to the tax allocation arrangement with Holdings and Holdings'
net operating loss position.
6. Inventories
Inventories at December 31, 1993 and 1992 consist of the following:
1993 1992
Raw materials and supplies $ 26,458 $ 17,623
Work-in-process 17,105 10,413
Finished goods 65,072 49,546
108,635 77,582
Adjustment to value inventory
at cost on the LIFO method 18 (2,575)
$108,653 $ 75,007
The amount of inventory recorded on the first-in first-out method at
December 31, 1993 and 1992 was $2,178 and $2,189, respectively.
7. Property, plant and equipment
Net property, plant and equipment at December 31, 1993 and 1992 consist of
the following:
1993 1992
Land $ 4,469 $ 3,743
Buildings and improvements 56,087 50,382
Machinery and equipment 352,409 270,845
Construction in progress 19,894 15,334
432,859 340,304
Less: accumulated depreciation
and amortization (142,464) (116,425)
$290,395 $223,879
F-40
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
8. Other Assets
Other assets at December 31, 1993 and 1992 consist of the following:
1993 1992
Cost in excess of fair value of
assets acquired $ 26,671 $ 20,178
Debt issuance costs 18,163 17,029
Covenants not to compete 8,500 8,500
Other 4,146 1,342
57,480 47,049
Less: accumulated amortization (12,640) (14,364)
$ 44,840 $ 32,685
In 1993, upon the effectiveness of the Credit Agreement, the Company wrote
off $841 of net debt issuance costs (net of tax) and capitalized $8,935 in
new debt issuance costs. In 1992, as part of the Refinancing, the Company
wrote off $3,325 of net debt issuance costs and capitalized $10,250 in new
debt issuance costs. Amortization expense for the years ended December 31,
1993 and 1992 was $4,817 and $4,424, respectively.
9. Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes" which requires the use of the liability method of
accounting for deferred income taxes. The Company had previously reported
under SFAS No. 96, "Accounting for Income Taxes". Under SFAS No. 96, the
Company had recognized a federal income tax benefit from the tax losses of
Holdings. Under SFAS No. 109, this benefit will be reflected as a
contribution to additional paid-in capital instead of a reduction of income
tax expense. Accordingly, the Company recorded a cumulative charge to
earnings and credit to paid-in capital of $6,000 for the difference in
methods up to the date of adoption. As permitted by SFAS No. 109, the
Company has elected not to restate prior years' financial statements.
F-41
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
9. Income Taxes (continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
at December 31 are as follows:
1993
Deferred tax liabilities:
Tax over book depreciation $20,700
Book over tax basis of assets acquired 24,000
Other 6,392
Total deferred tax liabilities 51,092
Deferred tax assets:
Book reserves not yet deductible
for tax purposes 20,700
Net operating loss carryforwards 7,800
Benefit taken for Holdings' losses 7,575
Other 2,000
Total deferred tax assets 38,075
Net deferred tax liabilities $13,017
The Company files a consolidated Federal income tax return with Holdings.
In accordance with the tax allocation agreement thereunder, the Company is
obligated to reimburse Holdings for the use of Holdings losses only to the
extent that Holdings has taxable income on a stand-alone basis. A
liability has not been established to the extent of the use of Holdings'
losses since the possibility of the ultimate payment for these benefits is
considered remote. Accordingly, the use of Holdings' losses has been
accounted for as a contribution of capital.
Also, in accordance with the tax allocation agreement, the Company is
required to reimburse Holdings for its allocable share of Holdings' tax
liability. In 1993, the Company's share of Holdings' federal tax
liability, for alternative minimum tax, aggregated $300.
The income tax provision for 1993 reflects the adoption of SFAS No. 109
under which the Company provides for taxes as if it were a separate
taxpayer. The income tax provision for 1992 and 1991 takes into
consideration certain matters covered under a tax allocation arrangement
with Holdings, under which the Company obtains a federal income tax
benefit from Holdings' tax losses.
F-42
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
9. Income Taxes (continued)
The income tax provision consists of the following:
1993 1992 1991
Current
Federal $ 300 $ - $ -
State 1,900 1,705 682
Foreign (400) 31 380
1,800 1,736 1,062
Deferred:
Federal 4,100 - -
State 400 464 438
Foreign - - -
4,500 464 438
$6,300 $2,200 $1,500
The aggregate income tax provision varied from that computed by using the
U.S. statutory rate as a result of the following:
1993 1992 1991
Income tax provision
at the U.S. federal
income tax rate $5,091 $5,398 $3,679
Income tax benefit realized
from Holdings - (4,650) (3,169)
State and foreign tax expense
net of federal income taxes 1,209 1,452 990
$6,300 $2,200 $1,500
The Company files a consolidated federal income tax return with Holdings.
On a consolidated basis the Company and Holdings have net operating loss
carryforwards at December 31, 1993 of approximately $105,000 which are
available to offset future consolidated taxable income of the group and
expire from 2001 through 2008. The Company and Holdings, on a consolidated
basis at December 31, 1993, have $1,900 of alternative minimum tax credits
which are available indefinitely to reduce future tax payments for regular
federal income tax purposes.
At December 31, 1993 the Company, if reporting on a separate company basis,
would have had net operating loss carryforwards for federal tax purposes of
approximately $19,000 which are available for carryforward for a period of
up to 15 years.
F-43
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
10. Bank Credit Facility
On December 21, 1993, the Company, Containers and Plastics (the
"Borrowers") and the Banks entered into the Credit Agreement pursuant to
which the Banks loaned to Silgan (i) $60,000 of term loans (the "A Term
Loans") and (ii) $80,000 of term loans (the "B Term Loans"), collectively,
the "Term Loans", and agreed to lend to Containers or Plastics up to an
aggregate of $70,000 of working capital loans (the "Working Capital
Loans"). Concurrent with the borrowings under the Credit Agreement, the
Company repaid in full amounts outstanding under the Amended and Restated
Credit Agreement. See Note 5 - Refinancings.
To secure the obligations of Borrowers under the Credit Agreement, the
Company pledged to the Banks principally all of the capital stock of its
subsidiaries and the subsidiaries have each granted to the Banks security
interests in substantially all of their respective real and personal
property. Such collateral also secures on an equal and ratable basis the
Secured Notes, subject to certain intercreditor arrangements. Holdings has
pledged to the Banks all of the capital stock of the Company. Holdings and
each of the Borrowers have guaranteed on a secured basis all of the
obligations of the Borrowers under the Credit Agreement.
The A Term Loans mature on September 15, 1996 and are payable in
installments during the listed years as follows:
A Term Loan
Installment Repayment Date Principal Amount
1994 $ 20,000
1995 20,000
1996 20,000
The B Term Loans mature and are payable in full on September 15, 1996.
Amounts repaid under the Term Loans cannot be reborrowed.
Under the Credit Agreement, the Company is required to repay the Term Loans
(pro rata for each tranche of Term Loans) in an amount equal to 75% of the
Company's Excess Cash Flow (as defined in the Credit Agreement) in any
fiscal year during the Credit Agreement (beginning with the 1994 fiscal
year). Additionally, the Company is required to repay the Term Loans (pro
rata for each tranche of Term Loans) and the Secured Notes, in an aggregate
amount equal to 80% of the net sale proceeds from certain assets sales and
100% of the net equity proceeds from certain sales of equity, all as
provided in the Credit Agreement and the Secured Notes Agreement.
F-44
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
10. Bank Credit Facility (continued)
The aggregate amount of Working Capital Loans which may be outstanding at
any time is subject to a borrowing base limitation of the sum of (i) 85% of
eligible accounts receivable of Containers and Plastics and (ii) 50% of
eligible inventory of Containers and Plastics. In lieu of Working Capital
Loans, Containers and Plastics may request Bankers Trust to issue up to
$15,000 of letters of credit (the "Letters of Credit"). At December 31,
1993, $6,094 of Letters of Credit were outstanding.
Subject to the terms of the Credit Agreement, the Working Capital Loans can
be borrowed, repaid and reborrowed from time to time until September 15,
1996, on which date all Working Capital Loans mature and are payable in
full.
Each of the Term Loans and each of the Working Capital Loans, at the
respective Borrower's election, consist of loans designated as Eurodollar
rate loans or as Base Rate loans. Subject to certain conditions, each of
the Term Loans and each of the Working Capital Loans can be converted from
a Base Rate loan into a Eurodollar rate loan and vice versa. The term
"Base Rate" means the highest of (i) 1/2 of 1% in excess of the Adjusted
Certificate of Deposit Rate (as defined in the Credit Agreement), (ii) 1/2
of 1% in excess of the Federal Funds Rate (as defined in the Credit
Agreement) and (iii) Bankers Trust's prime lending rate.
Interest on Term Loans maintained as Base Rate loans accrues at floating
rates of 1.75% (in the case of A Term Loans) and 2.25% (in the case of B
Term Loans) over the Base Rate. Interest on Term Loans maintained as
Eurodollar rate loans accrues at floating rates of 2.75% (in the case of A
Term Loans) and 3.25% (in the case of B Term Loans) over a formula rate
(the "Eurodollar Rate") determined with reference to the rate offered by
Bankers Trust for dollar deposits in the New York interbank Eurodollar
market. Interest on Working Capital Loans maintained as (i) Base Rate
loans accrues at floating rates of 2% over the Base Rate or (ii) Eurodollar
rate loans accrues at floating rates of 3% over the Eurodollar Rate. At
December 31, 1993, the loans were maintained as Base Rate loans and the
interest rate was between 7 3/4% and 8 1/4%.
Each of Containers and Plastics has agreed to jointly and severally pay to
the Banks, on a quarterly basis, a commitment commission calculated as
0.50% per annum on the daily average unused portion of the Banks' working
capital commitment in respect of the Working Capital Loans until such
working capital commitment is terminated. Additionally, Containers and
Plastics are required to pay to Bankers Trust, on a quarterly basis in
arrears, a letter of credit fee of 3.0% per annum and a facing fee of 1/4
of 1% per annum, each on the average daily stated amount of each letter of
credit issued for the account of Containers or Plastics, respectively.
F-45
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
10. Bank Credit Facility (continued)
The Credit Agreement requires the Company to meet certain financial
covenants, and restricts or limits, among other items, each of the
Borrowers' ability to (i) incur additional indebtedness, (ii) create
certain liens, (iii) consolidate, merge or sell assets, (iv) make capital
expenditures and (v) pay dividends, except for distributions to Holdings to
fund federal and state tax obligations.
For 1993, 1992 and 1991, respectively, the average amount of borrowings
under the Working Capital Loans was $51,935, $44,525, and $56,342; the
average annual interest rate was 6.5%, 7.2% and 9.0%; and the highest
amount of such borrowings at any month-end was $80,250, $80,800 and
$81,300.
11. Senior Secured Notes
The Secured Notes constitute senior indebtedness of the Company and are
secured by a first lien on substantially all of the assets of the Company.
Such collateral also secures on an equal and ratable basis, subject to
certain intercreditor arrangements, all indebtedness of the Company under
the Credit Agreement. The Secured Notes mature on June 30, 1997 and bear
interest, which is payable quarterly, at a rate of three-month LIBOR plus
3%. The interest rate is adjusted quarterly. The interest rate in effect
at December 31, 1993 was 6.38%.
The Secured Notes are redeemable at the option of the Company at par plus
accrued and unpaid interest to the redemption date. Net cash proceeds from
certain asset sales and the issuance of capital stock by the Company are
required to be applied to prepay the Secured Notes and indebtedness under
the Credit Agreement on a pro rata basis, subject to certain exceptions.
The Secured Notes contain covenants which are comparable to or less
restrictive than those required by the Credit Agreement. These covenants
limit, among other items, the Company's ability to (i) incur additional
indebtedness, (ii) pay dividends, except for distributions to Holdings to
fund federal and state tax obligations, (iii) enter into certain
transactions with affiliates, (iv) repay subordinated indebtedness, and (v)
effect certain mergers, consolidations and transfers of assets.
12. 11 3/4% Senior Subordinated Notes
The 11 3/4% Notes, which mature on June 15, 2002, represent unsecured
general obligations of Silgan, subordinate in right of payment to
obligations of the Company under the Credit Agreement and the Secured Notes
and effectively subordinate to all of the obligations of the subsidiaries
of the Company. Interest is payable semi-annually on June 15 and December
15.
F-46
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
12. 11 3/4% Senior Subordinated Notes (continued)
The 11 3/4% Notes are redeemable at the option of the Company, in whole or
in part, at any time during the twelve months commencing June 15 of the
following years at the indicated percentages of their principal amount plus
accrued interest:
Redemption
Year Percentage
1997 105.8750%
1998 102.9375%
1999 and thereafter 100.0000%
The 11 3/4% Notes Indenture contains covenants which are comparable to or
less restrictive than those required by the Credit Agreement and the
Secured Notes.
The estimated fair value of the 11 3/4% Notes at December 31, 1993 was
$145,800.
13. Preferred Stock
The Preferred Stock holders received cumulative preferential dividends at
the rate per annum of 15% per share calculated as a percentage of $100.
Dividends were, at the option of the Company, paid in additional shares of
Preferred Stock. During 1992 and 1991, the Company issued 21,301 and
38,173 shares of Preferred Stock at $100 per share, representing its
Preferred Stock dividend requirement for the two quarters ended May 15,
1992 and the four quarters ended November 15, 1991. A cash dividend
payment of $1,137 was made for the quarter ended August 15, 1992.
As of December 31, 1993, the Company has authorized 1,000 shares of
Preferred Stock, of which, none is issued or outstanding.
14. Retirement Plans
The Company sponsors contributory and non-contributory pension and
retirement plans which cover substantially all employees, other than union
employees covered by multi-employer defined benefit pension plans under
collective bargaining agreements. The benefits are paid based on either a
career average, final pay or years of service formula. With respect to
certain hourly employees, pension benefits are provided for based on stated
amounts for each year of service. The Company funds the minimum amount
required under the Employee Retirement Income Security Act of 1974 with
certain employees contributing approximately 3% of their annual
compensation.
F-47
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
14. Retirement Plans (continued)
The provisions of SFAS No. 87, "Employers' Accounting for Pensions" require
recognition in the balance sheet of an additional minimum liability and
related intangible asset for pension plans with accumulated benefits in
excess of plan assets. At December 31, 1993, an additional liability of
$2,107 and an intangible asset of equal amount are reflected in the
consolidated balance sheet. The additional liability is principally the
result of the change in the assumed discount rate.
Based on the latest actuarial information available, the following table
sets forth the defined benefit plans funded status and amounts recognized
in the Company's balance sheets as of December 31:
1993 1992
Actuarial present value of
benefit obligations:
Vested benefit obligations $ 19,096 $ 13,543
Non-vested benefit obligations 1,100 970
Accumulated benefit obligations 20,196 14,513
Additional benefits due to
future salary levels 9,825 9,847
Projected benefit obligations 30,021 24,360
Plan assets at fair value 18,327 14,644
Projected benefit obligation
in excess of plan assets 11,694 9,716
Unrecognized actuarial gain (loss) 2 2,431
Unrecognized prior service costs (2,093) (2,218)
Additional minimum liability 2,107 114
Net pension liability $ 11,710 $10,043
The 1992 funded status amounts have been restated to reflect revisions in
actuarial computations. These revisions had no effect on the Company's net
pension liability.
In addition to amounts set forth above, the Company has assumed defined
benefit plan obligations of approximately $11,000 (as calculated at the
Company's discount rate of 7 1/2%) in connection with the acquisition of DM
Can. Under the terms of the DM Can purchase agreement, Del Monte will be
transferring to the Company fund assets of approximately $9,000 (as
computed using a discount rate of 9%).
F-48
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
14. Retirement Plans (continued)
The assumptions used in determining actuarial present value of plan benefit
obligations as of December 31:
1993 1992 1991
Discount rate 7.5% 8.5% 8.5%
Weighted average rate of
compensation increase 4.5% 5.0 - 5.5% 5.0 - 5.5%
Expected long-term rate of
return on plan assets 8.5% 8.5% 8.5%
The components of total pension expense are as follows:
1993 1992 1991
Service cost $1,809 $1,722 $1,816
Interest cost 2,144 2,101 1,977
Net amortization and deferrals 500 75 1,298
Actual return on assets (1,784) (891) (1,717)
Other (gains) (183) (183) (307)
Net pension cost of defined
benefit plans 2,486 2,824 3,067
Multi-employer plans 2,210 2,159 2,041
Total pension expense $4,696 $4,983 $5,108
Plan assets are invested in money market funds, equity funds and bond
funds.
In 1991, the Company realized a curtailment gain of $2,500 due to a
reduction in the Company's work force. Such amount has not been reflected
in total pension expense above.
Containers sponsors a deferred incentive savings plan for eligible salaried
employees where contributions are provided if Containers meets certain
financial targets. The maximum aggregate amount of awards will not exceed
15% of the aggregate salaries of the participants in the Plan.
Contributions of $1,630, $1,730 and $1,700 were made for 1993, 1992 and
1991, respectively.
Plastics sponsors a savings and investment plan which is organized under
Section 401(k) of the Internal Revenue Code. Plastics' contributions to
the plan were $146, $147 and $149 in 1993, 1992 and 1991, respectively.
F-49
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
15. Postretirement Benefits Other than Pensions
As discussed in Note 2, the Company adopted SFAS No. 106 in 1993. The
Company has elected to immediately recognize a cumulative charge of $3,125
(after related income taxes of $1,875) for this change in accounting
principle which represents the accumulated postretirement benefit
obligation existing as of January 1, 1993. This change in accounting
principle, excluding the cumulative effect, decreased pretax income for the
year ended December 31, 1993 by approximately $478. The postretirement
benefit cost for 1992 and 1991, which was recorded on a pay-as-you-go
basis, has not been restated and was not material.
The Company has defined benefit health care and life insurance plans that
provide postretirement benefits to certain employees. The plans are
contributory, with retiree contributions adjusted annually, and contain
cost sharing features including deductibles and coinsurance. The Company
does not fund the plans.
The following table presents the plan's funded status and amounts
recognized in the Company's balance sheet as of December 31, 1993:
Accumulated postretirement
benefit obligation:
Retirees $1,209
Fully eligible active plan participants 1,197
Other active plan participants 2,127
4,533
Plan assets at fair value -
Accumulated postretirement benefit
obligation in excess of plan assets 4,533
Unrecognized net gain or (loss) (462)
Unrecognized transition obligation -
Accrued postretirement benefit cost $4,071
Net periodic postretirement benefit cost for 1993 included the following
components:
Service cost $ 152
Interest cost 326
Net periodic postretirement benefit cost $ 478
F-50
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
15. Postretirement Benefits Other than Pensions (continued)
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%. The weighted average rate of
increase in future compensation levels was 4.5%. For measuring the
expected postretirement benefit obligation, the weighted-average annual
assumed rate of increase in the per capita cost of covered benefits (i.e.,
health care cost trend rate) principally used is 14% for 1994 (15% for
1993). This rate is assumed to decrease by 1% per year to an ultimate rate
of 6%. A 1% increase in the trend rate assumption would increase the
accumulated postretirement benefit obligation as of December 31, 1993 by
approximately $62 and increase the aggregate of the service and interest
cost components of the net periodic postretirement benefit cost for 1993 by
approximately $12. As of December 31, 1992, the plan's unfunded
accumulated postretirement benefit obligations for retirees and active
participants was $1,144 and $3,856, respectively.
16. Stock Option Plans
Containers and Plastics have established separate but virtually identical
stock option plans for their key employees pursuant to which options to
purchase shares of common stock of Holdings' and its subsidiaries and stock
appreciation rights ("SARs") may be granted.
Options granted under the plans may be either incentive stock options or
non qualified stock options. To date, all stock options granted have been
non qualified stock options. Under the plans, Containers and Plastics have
each reserved 1,200 shares of their common stock in order to enable them to
issue shares under the plans. Both Containers and Plastics have 10,800
shares of $0.01 par value common stock currently issued, all of which are
owned by Silgan.
The SARs extend to all of the shares covered by the options and provide for
the payment by either Containers or Plastics, as the case may be, to the
holders of the options an amount in cash or stock equal to the excess of
the proforma book value, as defined, of a share of common stock (or in the
event of a public offering, the fair market value of a share of common
stock) over the exercise price of the option with certain adjustments for
the portion of vested stock appreciation not paid at the time of
recapitalization in June, 1989. The subsidiaries have the right to
repurchase, and employees have the right to require the subsidiaries to
repurchase, their common stock at the then proforma book value, or market
value as the case may be, should employees leave the Company.
F-51
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
16. Stock Option Plans (continued)
At December 31, 1993, there were outstanding options for 816 shares under
the Containers' Plan and 300 shares under the Plastics' Plan. The exercise
prices per share range from $2,122 to $2,456 for the Containers' options
and are $746 for the Plastics' options. There were 528 options and 240
options exercisable at December 31, 1993 under the Containers' and
Plastics' plans, respectively. The Company incurred charges relating to
the vesting and payment of benefits under the stock option plans of $200
and $350 in 1993 and 1992, respectively (none in 1991).
The stock options and SARs generally become exercisable ratably over a five
year period.
In the event of a public offering of any of the Company's or Holdings'
capital stock or a sale of the Company or Holdings to a third party, (i)
the options granted by Containers and Plastics pursuant to the plans, or
(ii) any stock issued upon exercise of such options issued by Containers
and Plastics are convertible into either stock options or common stock of
the Company or Holdings. The conversion of such options or shares will be
based upon a valuation of Holdings and an allocation of such value among
the subsidiaries after giving affect to, among other things, that portion
of the outstanding obligation of Holdings allocable to each such
subsidiary.
17. Business Information
The Company is engaged in the packaging business. Its principal products
are metal and plastic containers. Net sales for its metal and plastic
containers were $445,871 and $186,319; $425,844 and $192,596; and $435,349
and $232,139 for the years ended December 31, 1993, 1992 and 1991,
respectively. Other sales amounted to $13,278, $11,599 and $10,723 for the
years ended December 31, 1993, 1992 and 1991, respectively.
One customer accounted for 34.1%, 36.5% and 32.2%, of net sales during the
years ended December 31, 1993, 1992 and 1991 respectively. At December 31,
1993 and 1992, 12.9% and 14.5%, respectively, of the accounts receivable
balance is due from this customer.
F-52
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
18. Related Party Transactions
Pursuant to various management services agreements (the "Management
Agreement") entered into between Holdings, Silgan, Containers, Plastics,
and S&H, Inc. ("S&H"), a company wholly owned by Messrs. Silver and
Horrigan, the Chairman of the Board and President of Holdings,
respectively, S&H provides Holdings and the Company and its subsidiaries
with general management, supervision and administrative services (the
"Services"). In consideration for the Services, S&H receives a fee of
4.95% (of which 0.45% is payable to MS & Co.) of Holdings' consolidated
earnings before depreciation, amortization, interest and taxes ("EBDIT")
until EBDIT has reached the Scheduled Amount set forth in the Management
Agreement and 3.3% (of which 0.3% is payable to MS & Co.) after EBDIT has
exceeded the Scheduled Amount up to the Maximum Amount as set forth in the
Management Agreement, plus reimbursement for all related out-of-pocket
expenses. The total amount incurred for the years ended December 31, 1993,
1992 and 1991 was approximately $4,385, $4,225 and $4,027, respectively.
Included in accounts payable at December 31, 1993 and 1992, was
approximately $575 and $200, payable to S&H, respectively.
Under the terms of the Management Agreement, the Company agreed, subject to
certain exceptions, to indemnify S&H and any of its affiliates, officers,
directors, employees, subcontractors, consultants or controlling persons
against any loss or damage they may sustain arising in connection with the
Management Agreement.
In connection with the 1992 Refinancing, MS & Co. received as compensation
for its services as underwriter for the Secured Notes, the 11 3/4% Notes
and the Discount Debentures an aggregate of $11,500.
In connection with the Credit Agreement entered into in 1993, the Banks
(including Bankers Trust) received certain fees amounting to $8,100.
19. Commitments
The Company is committed under certain noncancelable operating leases for
office and plant facilities, equipment and automobiles. Minimum future
rental payments under these operating leases are:
1994 $8,960
1995 6,700
1996 5,829
1997 4,873
1998 3,606
Thereafter 9,44l
$39,409
Rental expense for the years ended December 31, 1993, 1992 and 1991 was
approximately $7,999, $7,977 and $8,102, respectively.
F-53
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
20. Litigation
On June 30, 1989, Holdings acquired all of the outstanding shares of the
Company for $6.50 per share (the "Merger"). In connection with the Merger,
two complaints were filed during 1989 in the Court of Chancery in the State
of Delaware (the "Court") by certain Silgan Class B Common Stockholders
against Silgan, Holdings, MS & Co., officers and directors.
The complaints allege, among other things, that certain defendants breached
their fiduciary duties under Delaware law to minority stockholders of
Silgan by engaging in unfair dealing, attempting to effect a merger at a
grossly inadequate price and distributing misleading proxy materials. The
complaints ask the Court, among other things, to rescind the Merger and/or
to grant to plaintiffs such damages, including rescissory damages, as are
found by the Court to be proven at trial. Additionally, the plaintiffs
each filed a petition for appraisal.
In 1991, the Court stayed one of the actions and related appraisal
proceeding based upon the seizure and placement into receivership of one
plaintiff. The Court lifted the stay of the action and appraisal
proceeding on March 30, 1992 and both the action and appraisal were
dismissed in February 1994 following settlement with the plaintiffs. The
second action was voluntarily dismissed on January 29, 1992 without
prejudice to the right of the plaintiffs to reinstate the action at the
conclusion of the related appraisal proceeding. Discovery is proceeding in
the appraisal. The Court has set the week of May 9, 1994 for trial.
Additionally, a complaint was filed by parties who are limited partners of
The Morgan Stanley Leveraged Equity Fund, L.P. ("MSLEF") against a number
of defendants including Silgan and Holdings. The complaint alleges that
Silgan and Holdings aided and abetted the general partners MSLEF in
breaching their fiduciary duties to the limited partners. The Court
dismissed all claims against Silgan and Holdings related to this action on
January 14, 1993, and subsequently upheld that dismissal after the
plaintiff filed a motion for reargument.
The defendants believe that there is no factual basis for the allegations
and claims contained in the complaints. Management also believes that the
lawsuits are without merit and they intend to defend the lawsuits
vigorously. In addition, management believes that the ultimate resolution
of these matters and the appraisal proceedings will not have a material
effect on the financial condition or results of operations of Silgan or
Holdings.
F-54
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
20. Litigation (continued)
In connection with the Merger and the litigation described above, as of
December 31, 1993 approximately $6,800 of the purchase price has not been
paid to certain former stockholders and such amount has been recorded by
Holdings as a current liability. To the extent the Company elects to make
such payments to former stockholders, the Company's stockholder's equity
could be reduced by the amount of such payment.
Other than the actions mentioned above there are no other pending legal
proceedings, other than ordinary routine litigation incidental to the
business of the Company, to which the Company is a party or to which any of
its properties are subject.
F-55
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED BALANCE SHEETS
December 31, 1993 and 1992
(Dollars in thousands)
ASSETS
1993 1992
Current assets:
Cash and cash equivalents $ 19 $ 215
Other current assets 114 698
Total current assets 133 913
Investment in and other amounts due
from subsidiary 58,983 38,958
Notes receivable-subsidiary 1,489 1,489
Debt issuance costs and other assets 6,043 6,714
$ 66,648 $ 48,074
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 10,291 $ 8,761
Amount payable to subsidiary 606 746
Total current liabilities 10,897 9,507
Discount debentures 200,718 176,551
Class A Common Stock subject to put option 25,050 14,613
Deficiency in Stockholders' equity:
Common stock 8 5
Additional paid-in capital 33,606 18,609
Accumulated deficit (203,631) (171,211)
Total stockholder's equity (170,017) (152,597)
$ 66,648 $ 48,074
See Notes to Consolidated Financial Statements for Silgan Holdings Inc
appearing elsewhere in this Form 10-K.
F-56
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED STATEMENTS OF OPERATIONS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Net sales $ - $ - $ -
Cost of goods sold - - -
Gross profit - - -
Selling, general and administrative
expenses 674 536 510
Loss from operations (674) (536) (510)
Equity in earnings of consolidated
subsidiaries 5,028 1,857 6,933
Interest expense and other related
financing costs (26,339) (30,710) (27,079)
Interest income 2 536 64
Loss before income taxes (21,983) (28,853) (20,592)
Income tax provision - - -
Loss before
extraordinary charges (21,983) (28,853) (20,592)
Extraordinary charges relating
to early extinguishment of debt - (14,522) -
Net loss $(21,983) $ 43,375 $(20,592)
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere in this Form 10-K.
F-57
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Cash flows from operating activities: $ (196) $(18,921) $ (174)
Cash flows from investing activities:
Investment in subsidiary (15,000) - -
Cash dividend received from
subsidiary - 15,724 -
Net cash provided (used) by
investing activities (15,000) 15,724 -
Cash flows from financing activities:
Proceeds from issuance of common stock 15,000 - -
Proceeds from issuance of
discount debentures - 165,435 -
Redemption of reset debentures - (181,588) -
Repayment of advance to subsidiary - 25,200 -
Debt financing costs - (7,050) -
Net cash provided (used) by
financing activities 15,000 1,997 -
Net increase (decrease) in cash
and cash equivalents (196) (1,200) (174)
Cash and cash equivalents at
the beginning of year 215 1,415 1,589
Cash and cash equivalents at
end of year $ 19 $ 215 $ 1,415
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere in this Form 10-K.
F-58
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF SILGAN CORPORATION
CONDENSED BALANCE SHEETS
December 31, 1993 and 1992
(Dollars in thousands)
ASSETS
1993 1992
Current assets:
Cash and cash equivalents $ 61 $ 202
Notes receivable-subsidiaries 39,850 18,644
Interest receivable-subsidiaries 810 1,456
Other current assets 214 114
Total current assets 40,935 20,416
Investment in and other amounts due
from subsidiaries 37,104 38,861
Notes receivable-subsidiaries 305,072 206,180
Amount receivable from parent 607 746
Other assets 950 1,379
$384,668 $267,582
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of term loans $ 20,000 $ 18,644
Accrued interest payable 763 967
Accrued expenses 1,268 331
Total current liabilities 22,031 19,942
Term loans 120,000 19,341
Senior secured notes 50,000 50,000
11 3/4% Senior subordinated notes 135,000 135,000
Amounts payable to subsidiaries 3,123 6,491
Other long-term liabilities 1,711 4,033
Stockholder's equity:
Common stock - -
Additional paid-in capital 64,135 41,560
Retained earnings (deficit) (11,332) (8,785)
Total stockholder's equity 52,803 32,775
$384,668 $267,582
See Notes to Consolidated Financial Statements for Silgan Corporation
appearing elsewhere in this Form 10-K.
F-59
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF SILGAN CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Net sales $ - $ - $ -
Cost of goods sold - - -
Gross profit - - -
Selling, general and administrative
expenses 368 239 313
Loss from operations (368) (239) (313)
Equity in earnings (losses) of
consolidated subsidiaries (7,570) 6,148 9,718
Other income 1,480 832 -
Interest expense and other related
financing costs (19,899) (21,429) (19,635)
Interest income-subsidiaries 23,940 19,313 19,552
Income (loss) before income
taxes (2,417) 4,625 9,322
Income tax provision - - -
Income (loss) before
extraordinary charges (2,417) 4,625 9,322
Extraordinary charges relating
to early extinguishment
of debt (130) (23) -
Net income (loss) (2,547) 4,602 9,322
Preferred stock dividend
requirements - 2,745 3,889
Net income (loss) applicable
to common stockholder $ (2,547) $ 1,857 $ 5,433
See Notes to Consolidated Financial Statements for Silgan Corporation
appearing elsewhere in this Form 10-K.
F-60
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF SILGAN CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Cash flows from operating activities: 359 1,825 26
Cash flows from investing activities:
(Increase) decrease in notes
receivable-subsidiaries (117,515) (39,323) 23,000
Decrease in investment in
subsidiaries - 30,008 -
Cash dividends received from
subsidiaries - 16,861 -
Net cash provided (used) by
investing activities (117,515) 7,546 23,000
Cash flows from financing activities:
Repayment of term loan (37,985) (35,827) (23,000)
Proceeds from issuance of term loans 140,000 - -
Proceeds from issuance of
senior secured notes - 50,000 -
Proceeds from issuance of 11 3/4%
senior subordinated notes - 135,000
Redemption of 14% senior
subordinated notes - (85,000) -
Redemption of preferred stock - (30,008) -
Capital contribution by Parent 15,000 - -
Repayment of advance from Parent - (25,200) -
Dividend to Parent - (15,724) -
Cash dividends paid on
preferred stock - (1,137) -
Debt financing costs - (1,301) -
Net cash provided (used) by
financing activities 117,015 (9,197) (23,000)
Net increase (decrease) in cash
and cash equivalents (141) 174 26
Cash and cash equivalents at
the beginning of year 202 28 2
Cash and cash equivalents at
end of year $ 61 $ 202 $ 28
See Notes to Consolidated Financial Statements for Silgan Corporation
appearing elsewhere in this Form 10-K.
F-61
SCHEDULE V
SILGAN CORPORATION
SCHEDULES OF PROPERTY, PLANT AND EQUIPMENT
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
Balance at Other changes
beginning Additions add (deduct) Balance at
Description of period at cost Retirements describe end of period
For the year ended
December 31, 1991:
Land $ 4,666 $ - $ (650) $ (79) $ 3,937
Buildings and mprovements 50,307 1,770 (2,520) (709) 48,848
Machinery and equipment 235,249 23,635 (8,005) 1,890 252,769
Construction-in-progress 17,448 (3,571) - - 13,877
$307,670 $ 21,834 $ (11,175)(1) $ 1,102 $319,431
For the year ended
December 31, 1992:
Land $ 3,937 $ - $ (194) $ - $ 3,743
Buildings and improvements 48,848 1,542 (8) - 50,382
Machinery and equipment 252,769 20,448 (1,643) (729) 270,845
Construction-in-progress 13,877 1,457 - - 15,334
$319,431 $ 23,447 $ (1,845) $ (729) $340,304
For the year ended
December 31, 1993:
Land $ 3,743 $ 726 $ - $ - $ 4,469
Buildings and improvements 50,382 5,705 - - 56,087
Machinery and equipment 270,845 87,189 (5,335) (290) 352,409
Construction-in-progress 15,334 4,560 - - 19,894
$340,304 $ 98,180(2) $ (5,335) $ (290) $432,859
(1)Principally represents the sale of the PET carbonated bottle beverage
assets.
(2)Includes the preliminary allocation of property, plant and equipment
acquired from Del Monte.
F-62
SCHEDULE VI
SILGAN CORPORATION
SCHEDULES OF ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
Additions
Balance at charged to Other changes
beginning costs and add (deduct) Balance at
Description of period expenses Retirements describe end of period
For the year ended
December 31, 1991:
Land $ - $ - $ - $ - $ -
Buildings and improvements 5,618 2,027 (227) - 7,418
Machinery and equipment 57,380 27,992 (3,852) (8) 81,512
Construction-in-progress - - - - -
$ 62,998 $ 30,019 $ (4,079) $ (8) $ 88,930
For the year ended
December 31, 1992:
Land $ - $ - $ - $ - $ -
Buildings and improvements 7,418 2,079 (3) 3 9,497
Machinery and equipment 81,512 27,459 (1,808) (235) 106,928
Construction-in-progress - - - - -
$ 88,930 $ 29,538 $ (1,811) $ (232) $116,425
For the year ended
December 31, 1993:
Land $ - $ - $ - $ - $ -
Buildings and improvements 9,497 2,140 - - 11,637
Machinery and equipment 106,928 29,467 (5,452) (116) 130,827
Construction-in-progress - - - - -
$116,425 $ 31,607 $ (5,452) $ (116) $142,464
F-63
SCHEDULE VIII
SILGAN CORPORATION
SCHEDULES OF VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to
beginning costs and other accounts Deductions Balance at
Description of period expenses describe describe end of period
For the year ended
December 31, 1991:
Allowance for
doubtful accounts
receivable $ 919 $ 108 $ - $ 102 $ 925
For the year ended
December 31, 1992
Allowance for
doubtful accounts
receivable $ 925 $ 815 $ - $ 97 $1,643
For the year ended
December 31, 1993:
Allowance for
doubtful accounts
receivable $1,643 $ 91 $ - $ 650(1) $1,084
(1) Uncollectible accounts written off, net of recoveries.
F-64
INDEX TO EXHIBITS
Exhibit No. Exhibit
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22. Subsidiaries of the Registrant.