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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(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, 1995
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 the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark 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 non-affiliates as of March 15,
1996.
As of March 15, 1996, 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
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 of a broad range of steel and
aluminum containers for human and pet food. The Company also manufactures custom
designed plastic containers for health, personal care, food, beverage,
pharmaceutical and household chemical products in North America. In 1995, the
Company had net sales of approximately $1.1 billion.
On August 1, 1995, Silgan's wholly owned subsidiary, Silgan Containers
Corporation ("Containers"), acquired from American National Can Company ("ANC")
substantially all of the assets of ANC's Food Metal and Specialty business ("AN
Can") for approximately $349 million. See "Company History" below. AN Can
manufactures and sells metal food containers and rigid plastic containers for a
variety of food products and metal caps and closures for food and beverage
products. The acquisition of AN Can has enabled the Company to diversify its
customer base and geographic presence. The Company believes that the acquisition
of AN Can will also result in the realization of cost savings for the Company.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations." On a pro forma basis after giving effect to the acquisition of AN
Can, in 1995 the Company would have had net sales of approximately $1.4 billion.
Management believes that the Company is the sixth largest can producer
and the largest food can producer in North America, as well as one of the
largest producers in North America of custom designed plastic containers for
health and personal care products. Silgan has grown rapidly since its inception
in 1987 primarily as a result of acquisitions, but also through internally
generated growth. In addition to the acquisition of AN Can in August 1995,
Containers acquired the U.S. metal container manufacturing business of Del Monte
Corporation ("Del Monte") in December 1993. See "Company History" below.
The Company's strategy is to continue to increase its share of the North
American packaging market through acquisitions, as well as investment in
internally generated opportunities. The Company intends to focus particular
attention on those rigid metal and plastic container segments where operating
synergies are likely.
Metal Container Business
Management estimates that Containers is currently the sixth largest can
producer and the largest manufacturer of metal food containers in North America.
In 1995, Containers sold approximately 28% of all metal food containers used in
the United States. On a pro forma basis after giving effect to the acquisition
of AN Can, in 1995 Containers would have sold approximately 36% of all metal
food containers sold in the United States. Although the food can industry in the
United States is relatively mature in terms of unit sales growth, Containers, on
a pro forma basis after giving effect to the acquisition of AN Can, has realized
compound annual unit sales growth in excess of 16% since 1987. Types of
containers manufactured include those for vegetables, fruit, pet food, meat,
tomato based products, coffee, soup, seafood, evaporated milk and infant
formula. Containers has agreements with Nestle Food Company ("Nestle") pursuant
to which Containers
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supplies substantially all of its metal container requirements, and an agreement
with Del Monte pursuant to which Containers supplies substantially all of its
metal container requirements. In addition to Nestle and Del Monte, Containers
has multi-year supply arrangements with other customers. The Company estimates
that approximately 80% of Containers' sales in 1996 will be pursuant to such
supply arrangements. See "Sales and Marketing" below.
Containers has focused on growth through acquisition followed by
investment in the acquired assets to achieve a low cost position in the food can
segment. Since its acquisition in 1987 of the metal container manufacturing
division of Nestle ("Nestle Can"), Containers has invested approximately $131
million in its acquired manufacturing facilities and has spent approximately
$307 million for the acquisition of additional can manufacturing facilities and
equipment. As a result of these efforts and management's focus on quality and
service, Containers has more than tripled its overall share of the food can
segment in terms of unit sales, from a share of approximately 10% in 1987 to a
share of approximately 36% in 1995, on a pro forma basis after giving effect to
the acquisition of AN Can.
Containers also manufacturers and sells certain specialty packaging
items, including metal caps and closures, plastic bowls and paper containers
primarily used by processors and packagers in the food industry. In 1995, the
Company had sales of specialty items of approximately $37 million.
Plastic Container Business
Management believes that Silgan's wholly owned subsidiary, Silgan
Plastics Corporation ("Plastics"), is one of the leading manufacturers of custom
designed, high density polyethylene ("HDPE") and polyethylene terephthalate
("PET") containers sold in North America for health and personal care products.
HDPE containers manufactured by Plastics include personal care containers for
shampoos, conditioners, hand creams, lotions, cosmetics and toiletries,
household chemical containers for scouring cleaners, specialty cleaning agents,
lawn and garden chemicals and pharmaceutical containers for tablets, laxatives
and eye cleaning solutions. Plastics manufactures PET custom containers for
mouthwash, liquid soap, skin care lotions, gastrointestinal and respiratory
products, pourable and viscous salad dressings, condiments, instant coffees,
premium water and liquor. See "Products" below.
Plastics has grown primarily by strategic acquisition. From a sales base
of $89 million in 1987, Plastics' sales have grown at a compound rate of 12% to
$220 million in 1995. Plastics emphasizes value-added design, fabrication and
decoration of custom containers. Plastics is aggressively pursuing opportunities
in custom designed PET and HDPE containers for which the market has been growing
principally due to consumer preferences for plastic containers. The Company
believes it has equipment and technical expertise to take advantage of these
growth segments.
Products
Metal Container Business
The Company is engaged in the manufacture and sale of steel and aluminum
containers that are used primarily by processors and packagers for human and pet
food. Types of containers manufactured include those for vegetables, fruit, pet
food, meat, tomato based products, coffee, soup, seafood, evaporated milk and
infant formula. The Company does not produce cans for use in the beer or soft
drink industries.
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Plastic Container Business
The Company is also engaged in the manufacture and sale of plastic
containers primarily used for health, personal care, food, beverage (other than
carbonated soft drinks), pharmaceutical and household chemical products. Plastic
containers are produced by converting thermoplastic materials into containers
ranging in size from 1/2 to 96 ounces. Emphasis is on value-added design,
fabrication and decoration of the containers. The Company designs and
manufactures a wide range of containers for health and personal care products
such as shampoos, conditioners, hand creams, lotions, cosmetics and toiletries,
liquid soap, gastrointestinal and respiratory products, and mouthwash. Because
these 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 salad dressing, condiments, instant coffee, premium
water and liquor. Household chemical containers are designed and manufactured to
contain polishes, specialty cleaning agents, lawn and garden chemicals 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
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, 1995, Containers had approximately 80% of its
projected 1996 sales under multi-year contracts. Plastics has 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 to 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.
Metal Container Business
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 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.
Plastic Container Business
The Company utilizes two basic processes to produce plastic bottles. In
the blow extrusion 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
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shape. In the injection blow molding process, pellets of plastic resin are
heated and injected into a mold, forming a plastic preform. The plastic preform
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 to utilize
multi-layer container construction.
The Company's decorating methods for its plastic products include (1)
in-mold labeling which applies a paper or plastic film label to the bottle
during the blowing process and (2) post-mold decoration. Post-mold decoration
includes (i) silk screen decoration which enables the applications of images in
multiple colors to the bottle, (ii) pressure sensitive decoration which uses a
plastic film or paper label applied by pressure, (iii) heat transfer decoration
which uses a plastic film or plastic coated paper label applied by heat, and
(iv) hot stamping decoration which transfers images from a die using metallic
foils. 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.
Raw Materials
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, 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.
Metal Container Business
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 material requirements are
supplied through purchase orders with suppliers with whom the Company, through
its predecessors, has long-term relationships. If 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 comparable prices or terms. The Company believes that it will
be able to purchase sufficient quantities of steel and aluminum can sheet for
the foreseeable future.
Plastic Container Business
The raw materials used by the Company for the manufacture of plastic
containers are primarily resins in pellet form such as HDPE-PCR and virgin HDPE
and PET and, to a lesser extent, low density polyethylene, extrudable
polyethylene terephthalate, polyethylene terephthalate glycol, polypropylene,
polyvinyl chloride and medium density polyethylene. The Company's resin
requirements are acquired through multi-year arrangements for specific
quantities of resins with several major suppliers of resins. The price the
Company pays for resin raw materials is not fixed and is subject to market
pricing. The Company believes that it will be able to purchase sufficient
quantities of resins for the foreseeable future.
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Sales and Marketing
The Company markets its products in most areas of North America
primarily by a direct sales force and through a large network of distributors.
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 1995, 1994 and 1993, the Company's metal container business accounted
for approximately 80%, 76% and 71%, respectively, of the Company's total sales,
and the Company's plastic container business accounted for approximately 20%,
24% and 29%, respectively, of the Company's total sales. On a pro forma basis
after giving effect to the acquisition of AN Can, metal and plastic containers
in 1995 would have accounted for approximately 84% and 16% of the Company's
total sales, respectively. In 1995, 1994 and 1993, approximately 21%, 26% and
34%, respectively, of the Company's sales were to Nestle and in 1995 and 1994
approximately 15% and 21%, respectively, of the Company's sales were to Del
Monte. On a pro forma basis after giving effect to the acquisition of AN Can, in
1995 approximately 17% and 11% of the Company's sales would have been to Nestle
and Del Monte, respectively. No other customer accounted for more than 10% of
the Company's total sales during such years.
Metal Container Business
Management believes that the Company is currently the sixth largest can
producer and the largest food can producer in North America. In 1995, Containers
sold approximately 28% of all metal food containers in the United States.
Containers has entered into multi-year supply arrangements with many of its
customers, including Nestle and Del Monte. The Company estimates that
approximately 80% of its metal container sales in 1996 will be pursuant to such
arrangements.
In 1987, the Company, through Containers, and Nestle entered into supply
agreements (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. In 1995, sales
of metal cans by the Company to Nestle were $236.0 million.
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. 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.
In 1994, the term of certain of the Nestle Supply Agreements
(representing approximately 70% of the Company's 1995 unit sales to Nestle) was
extended through 2001. Under these Nestle Supply Agreements, Nestle has the
right to receive competitive bids under narrowly limited circumstances, and
Containers has the right to match any such bids. 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
Company cannot predict the effect, if any, of such bids upon its financial
condition or results of operations. The Company is currently engaged in
discussions with Nestle regarding the pricing and the extension of the term for
certain can requirements under these Nestle Supply Agreements. On a pro forma
basis after giving effect to the acquisition of AN Can, such can requirements
would have represented approximately 6% of the Company's 1995 sales.
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The Company has also commenced discussions with Nestle with respect to
the continuation beyond 1997 of the other Nestle Supply Agreements, which would
have represented approximately 6% of the Company's sales in 1995 on a pro forma
basis after giving effect to the acquisition of AN Can. Although the Company
intends to make every effort to extend these Nestle Supply Agreements on
reasonable terms and conditions, there can be no assurance that these Nestle
Supply Agreements will be extended.
On December 21, 1993, Containers and Del Monte entered into a supply
agreement (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. In 1995, sales of metal containers by the Company to Del
Monte were $159.4 million.
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, beginning in December 1998, 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 and fruit processors 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 customers beyond
the end of the season. The acquisition of AN Can increased the Company's
seasonal metal container business. Consistent with industry practice, such
customers may return unused containers. Historically, such returns have been
minimal.
Plastic Container Business
The Company is one of the leading manufacturers of custom designed HDPE
and PET containers sold in North America. The Company markets its plastic
containers in most areas of North America through a direct sales force and
through a large network of distributors. More than 70% of the Company's plastic
containers are sold for health and personal care products, such as hair care,
oral care, pharmaceutical and other health care applications. The Company's
customers in these product segments include Helene Curtis Inc., Procter & Gamble
Co., Avon Products, Inc., Andrew Jergens Inc., Chesebrough-Ponds USA Co., Dial
Corp., Warner-Lambert Company and Pfizer Inc. The Company also manufactures
plastic containers for food and beverage products, such as salad dressings,
condiments, instant coffee and premium water and liquor. Customers in these
product segments include Procter & Gamble Co., Kraft General Foods Inc. and
General Mills, Inc.
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.
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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 to 5
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.
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, 1996, the Company operated
44 manufacturing facilities, geographically dispersed throughout the United
States and Canada, that serve the distribution needs of its customers.
Metal Container Business
Management believes that the metal food containers segment 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. and Ball Corporation are the Company's most significant
national competitors. As an alternative to purchasing cans from commercial can
manufacturers, customers have the ability to invest in equipment to
self-manufacture their cans.
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 applications 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 applications include canned vegetables, fruits, meats and pet
foods. These sectors are the principal areas for which the Company manufactures
its products.
Plastic Container Business
Plastics competes with a number of large national producers of health,
personal care, food, beverage, pharmaceutical and household chemical plastic
container products, including Owens-Brockway Plastics Products, a division of
Owens-Illinois, Inc., Constar Plastics Inc., a subsidiary of Crown Cork and Seal
Company, Inc., Johnson Controls Inc., Continental Plastics Inc. 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.
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Employees
As of December 31, 1995, the Company employed approximately 940 salaried
and 4,170 hourly employees on a full-time basis, including approximately 1,400
employees who joined the Company on August 1, 1995 as a result of the
acquisition of AN Can. Approximately 63% of the Company's hourly plant employees
are represented by a variety of unions.
The Company's labor contracts expire at various times between 1996 and
2008. Contracts covering approximately 12% of the Company's hourly employees
presently expire during 1996. 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 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
Nestle Can, the Company has assumed liability for the past waste disposal
practices of Nestle Can. In 1989, the Company received notice that it is one of
many potentially responsible parties (or similarly designated parties) for
cleanup of hazardous waste at a site to which it (or its predecessor Nestle Can)
is alleged to have shipped such waste and 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 from Del
Monte of substantially all of the fixed assets and working capital of its
container manufacturing business in the United States ("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. In connection with the
acquisition of AN Can, subject to certain limitations, ANC has agreed to
indemnify the Company for a period of three years for the costs attributable to
any noncompliance by AN Can with any environmental law prior to the closing,
including costs attributable to the past waste disposal practices of AN Can.
The Company is subject to the Occupational Safety and Health Act and
other laws regulating noise exposure levels and other safety and health concerns
in the production areas of its plants.
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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
Metal Container Business
The Company's research, product development and product engineering
efforts relating to its metal containers are currently conducted at its research
centers at Oconomowoc, Wisconsin; Neenah, Wisconsin and at other plant
locations. The Company is building a state-of-the-art research facility in
Oconomowoc, Wisconsin in order to consolidate its two main research centers into
one facility.
Plastic Container Business
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 three 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 issued common stock, preferred stock and
senior subordinated notes and borrowed amounts 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 segment.
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 1989, the Company acquired the business and related assets of Amoco
Container Company ("Amoco Container"). In November 1991, Plastics sold its
nonstrategic PET carbonated beverage bottle business (the "PET Beverage Sale"),
exiting that commodity business.
-9-
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 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") and 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. Additionally, in June 1992
Aim, Fortune and certain other subsidiaries of Plastics 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
"1993 Credit Agreement") with the lenders from time to time party thereto (the
"Banks"), Bank of America National Trust and Savings Association, as Co-Agent,
and Bankers Trust Company ("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 1993 Credit Agreement to
refinance and repay in full all amounts owing under their previous credit
agreement.
On August 1, 1995, Containers acquired from ANC substantially all of the
assets of ANC's Food Metal and Specialty business for a purchase price of
approximately $349 million and the assumption of specific limited liabilities.
To finance the acquisition, Silgan, Containers and Plastics (collectively, the
"Borrowers") entered into a $675 million credit facility pursuant to a credit
agreement, dated as of August 1, 1995 (the "Credit Agreement") with the lenders
from time to time party thereto (the "Banks"), Bankers Trust, as Administrative
Agent and Co-Arranger, and Bank of America Illinois, as Documentation Agent and
Co-Arranger. Containers used funds borrowed under the Credit Agreement to
finance in full the purchase price for its acquisition of AN Can and to
refinance and repay in full all amounts owing under the 1993 Credit Agreement
and Silgan's $50 million of Senior Secured Floating Rate Notes due 1997 (the
"Secured Notes"). Additionally, Silgan has used borrowings under the Credit
Agreement to make non-interest bearing advances to Holdings to enable Holdings
to purchase $61.7 million face amount of the Discount Debentures, which Discount
Debentures have been canceled.
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 14515 N. Outer Forty,
Chesterfield, 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 30 metal container manufacturing
facilities, 11 plastic container manufacturing facilities and 3 specialty
packaging manufacturing facilities. Nineteen of these facilities are owned and
25 are leased by the Company. The leases expire at various times through 2020.
Some of these leases provide renewal options.
-10-
Below is a list of the Company's operating facilities, including
attached warehouses, as of February 28, 1996 for its metal container business:
Approximate
Building Area
Location (square feet)
-------- -------------
City of Industry, CA 50,000 (leased)
Kingsburgh, CA 37,783 (leased)
Modesto, CA 35,585 (leased)
Modesto, CA 128,000 (leased)
Modesto, CA 150,000 (leased)
Riverbank, CA 167,000
San Leandro, CA 200,000 (leased)
Stockton, CA 243,500
Broadview, IL 85,000
Hoopeston, IL 323,000
Rochelle, IL 175,000
Waukegan, IL 40,000 (leased)
Woodstock, IL 160,000 (leased)
Evansville, IN 188,000
Hammond, IN 160,000 (leased)
Laporte, IN 144,000 (leased)
Fort Madison, IA 66,000
Ft. Dodge, IA 49,500 (leased)
Savage, MN 160,000
St. Paul, MN 470,000
West Point, MS 25,000 (leased)
Mt. Vernon, MO 100,000
Northtown, MO 112,000 (leased)
St. Joseph, MO 173,725
Edison, NJ 280,000
Crystal City, TX 26,045 (leased)
Toppenish, WA 98,000
Vancouver, WA 127,000 (leased)
Menomonee Falls, WI 116,000
Menomonie, WI 60,000 (leased)
Oconomowoc, WI 105,200
Plover, WI 58,000 (leased)
Waupun, WI 212,000
In addition to the above facilities, the Company intends to
purchase from ANC its St. Louis, MO facility by June 1996.
-11-
Below is a list of the Company's operating facilities, including
attached warehouses, as of February 28, 1996 for its plastic container business:
Approximate
Building Area
Location (square feet)
-------- -------------
Anaheim, CA 127,000 (leased)
Deep River, CT 140,000
Monroe, GA 117,000
Norcross, GA 59,000 (leased)
Ligonier, IN 284,000 (leased)
Ligonier, IN 193,000
Seymour, IN 406,000
Franklin, KY 122,000 (leased)
Port Clinton, OH 336,000 (leased)
Langhorne, PA 156,000 (leased)
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. All of the Company's facilities are
subject to liens in favor of the Banks.
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
Appraisal Petition Arising from 1989 Mergers. In connection with
appraisal proceedings filed by certain former holders of 400,000 shares of stock
of Silgan in respect of the 1989 Mergers, on June 15, 1995, the Delaware Court
of Chancery awarded these former stockholders $5.94 per share, plus simple
interest at a rate per annum of 9.5%. This award was less than the amount, $6.50
per share, that these former stockholders would have received in the 1989
Mergers. The right of these former stockholders to appeal the Chancery Court's
decision has expired, and Silgan has tendered payment for such shares. Prior to
the trial for the appraisal, Silgan and the former holders of 650,000 shares of
Silgan's stock agreed to a settlement with respect to the value of such shares,
and Silgan made payment in full in respect of such settlement.
Katell/Desert Complaint. With respect to a complaint filed by certain
limited partners of The Morgan Stanley Leveraged Equity Fund, L.P. against a
number of defendants, including Holdings and Silgan, the court dismissed all
claims against Holdings and Silgan by memorandum opinion and order dated January
14, 1993. The court denied plaintiffs' motion to reargue the dismissal by order
dated March 29, 1993. The plaintiffs' time to appeal the dismissal of the claims
against Holdings and Silgan expired following the dismissal of the claims
against certain other defendants in June 1995.
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
-12-
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 Company is one of 16 defendant can companies
participating in a steering committee. The steering committee has actively
undertaken a feasibility study which was approved by the California Department
of Toxic Substances in June 1994. The Company has agreed with the other can
company defendants that its apportioned share of cleanup costs would be 6.72% of
the total cost of cleanup. On March 14, 1995, the court approved the Consent
Order settling the case and reaffirming the Company's 6.72% apportioned share of
the cleanup costs. 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 less than
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
material pending legal proceedings 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.
None.
-13-
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 August 1, 1995 made by Holdings in favor of the
banks under the Credit Agreement and pursuant to the indenture in respect of the
Discount Debentures, unless certain financial tests are met 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, 1995, 1994, 1993, 1992 and 1991 and for the periods
then ended.
The selected historical consolidated financial data of Holdings at
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995 (with the exception of employee data) was derived from the
historical consolidated financial statements that were audited by Ernst & Young
LLP, independent auditors, whose report appears elsewhere in this Annual Report
on Form 10-K. The selected consolidated historical financial data of Holdings at
December 31, 1993, 1992 and 1991 and for the years ended December 31, 1992 and
1991 were derived from the historical audited consolidated financial statements
for such periods.
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.
-14-
SELECTED FINANCIAL DATA
Year Ended December 31,
------------------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ----- -------
(Dollars in thousands)
Operating Data:
Net sales................................. $1,101,905 $861,374 $645,468 $630,039 $678,211
Cost of goods sold........................ 970,491 748,290 571,174 554,972 605,185
------- ------- ------- ------- -------
Gross profit.............................. 131,414 113,084 74,294 75,067 73,026
Selling, general and administrative
expenses............................ 46,848 37,997 32,495 32,809 33,733
Reduction in carrying value of assets..... 14,745 16,729 -- -- --
------ ------ -------- -------- ------
Income from operations.................... 69,821 58,358 41,799 42,258 39,293
Interest expense and other related
financing costs..................... 80,710 65,789 54,265 57,091 55,996
Minority interest expense................. -- -- -- 2,745 3,889
------- ------- -------- ------ ------
Loss before income taxes.................. (10,889) (7,431) (12,466) (17,578) (20,592)
Income tax provision...................... 5,100 5,600 1,900 2,200 --
------- ------- ------- -------- -------
Loss before extraordinary
charges and cumulative effect of
changes in accounting principles.... (15,989) (13,031) (14,366) (19,778) (20,592)
Extraordinary charges relating to
early extinguishment of debt........ (5,817) -- (1,341) (23,597) --
Cumulative effect of changes in
accounting principles .......... -- -- (6,276) -- --
-------- -------- -------- --------- ------
Net loss.................................. $(21,806) $(13,031) $(21,983) $(43,375) $(20,592)
======== ======== ======== ======== ========
Balance Sheet Data (at end of
period):
Fixed assets.............................. $487,301 $251,810 $290,395 $223,879 $230,501
Total assets.............................. 900,046 504,292 497,633 389,035 390,693
Total long-term debt...................... 750,873 510,763 505,718 383,232 315,461
Redeemable preferred stock of Silgan
(minority interest of Holdings)..... -- -- -- -- 27,878
Deficiency in stockholders' equity........ (179,804) (157,998) (144,967) (137,984) (94,609)
Other Data:
EBDITA................................ $132,428 $114,489 $76,095 $74,012 $72,141
EBDITA as a percentage of net sales....... 12.0% 13.3% 11.8% 11.7% 10.6%
Capital expenditures...................... $51,897 $ 29,184 $42,480 $23,447 $21,834
Depreciation and amortization $45,388 $ 37,187 $33,818 $31,754 $32,848
Number of employees (at end of
period) ........................ 5,110 4,000 3,330 3,340 3,560
(footnotes follow)
-15-
Notes to Selected Financial Data
On August 1, 1995, the Company acquired from ANC substantially all of the
assets of ANC's Food Metal and Specialty 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. See Note 3 to the Consolidated Financial Statements included
elsewhere in this Annual Report on Form 10-K.
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. See Note 3 to the
Consolidated Financial Statements included elsewhere in this Annual Report
on Form 10-K.
On November 15, 1991, the Company completed the PET Beverage Sale. For
1991, sales from the PET carbonated beverage business were $33.4 million.
During 1993, the Company adopted Statement of Financial Accounting
Standards ("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." 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 $1.7 million in 1995, $0.7 million in 1994
and $0.5 million in 1993, (vi) charges relating to the vesting of benefits
under SARs of $0.8 million in 1995 and $1.5 million in 1994 and (vii) the
reduction in carrying value of assets of $14.7 million and $16.7 million
in 1995 and 1994, respectively. EBDITA is being presented by the Company
as a supplement to the discussion of the Company's operating income and
cash flow from operations analysis because the Company believes that
certain persons may find it to be useful in measuring the Company's
performance and ability to service its debt. EBDITA is not a substitute
for GAAP operating and cash flow data.
Depreciation and amortization excludes amortization of debt financing
costs.
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. The number of employees at December 31, 1995
includes approximately 1,400 employees who joined the Company on August 1,
1995 as a result of the acquisition by Containers of AN Can.
-16-
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The Company has focused on growth through acquisitions followed by
investment in the acquired assets to gain production efficiencies and provide
internal growth. Since Silgan's inception in 1987, the metal food container
business, which had sales of $882 million in 1995, has realized compound annual
growth of 16% through both acquisitions of food can businesses and internal
growth. Since 1993, the Company has made two significant acquisitions. On August
1, 1995 the Company acquired AN Can and in December 1993 the Company acquired DM
Can. On a pro forma basis after giving effect to the acquisition of AN Can,
sales for the Company's metal container business would have been $1.2 billion in
1995. Since 1987, the Company, on a pro forma basis after giving effect to the
acquisition of AN Can, has realized annual sales growth in its metal food
container business in excess of 21%.
The Company believes that its investments have enabled it to achieve a
low cost position in the food can segment. To further enhance its low cost
position, the Company has realized cost reduction opportunities through plant
rationalization and equipment investment as well as from improved production
scheduling and line reconfiguration. Since 1992, the Company has closed eight
smaller, higher cost metal container facilities, including five facilities that
were closed in 1995 as a result of the integration of the manufacturing
operations of DM Can. Management believes that the acquisition of AN Can, which
has seventeen manufacturing facilities, provides the Company with further cost
reduction opportunities not only through production and manufacturing synergies
which it will realize from the combined operations but also through the
integration of the selling, general and administrative operations of AN Can into
the Company's existing metal container business. The Company anticipates it will
fully realize the benefits of integrating these selling and administrative
functions and certain of the manufacturing synergies by late 1996. On the other
hand, benefits which may be realized by rationalization of plant operations will
not occur before 1997. Because AN Can has higher labor costs than the Company's
existing metal container business and any benefits realized from plant
rationalizations will not occur until after 1996, the Company expects that the
gross margin for its metal container business will decline modestly from its
historical rate in 1996.
Although employee termination costs associated with plant
rationalizations and administrative workforce reductions and other plant exit
costs associated with the acquisition of AN Can have been accrued through
purchase accounting adjustments, the Company has incurred in 1995 and will be
incurring in 1996 other non-recurring costs which under current accounting
pronouncements will be charged against operating income. These costs, which
include redundant charges related to the integration of the administrative and
general functions as well as costs associated with plant rearrangement and
clean-up, were $3.2 million in 1995 and are expected to be approximately $4.0
million in 1996.
To enhance its competitive position, the Company believes that it has
maintained a stable customer base by entering into multi-year supply
arrangements with a majority of its metal food can customers. Such arrangements
generally provide for pricing changes in accordance with cost change formulas,
thereby reducing the Company's exposure to the volatility of raw material prices
but also limiting the Company's ability to increase prices. The arrangement to
supply substantially all of Del Monte's metal container requirements in the
United States under the DM Supply Agreement extends to December 2003 and the
arrangement to supply a majority of Nestle's domestic metal container
requirements under the Nestle Supply Agreements extends through 2001. Revenues
from these two customers represented approximately 45% of net sales by the metal
container business in 1995. The acquisition of AN Can has enabled the Company to
diversify its customer base and expand its domestic geographic presence. Similar
to the Company's existing metal container business, AN Can has multi-year supply
arrangements with many of its metal food container customers. As a result, the
Company estimates that approximately 80% of its 1996 metal container sales will
be subject to long term contracts. Furthermore, on a pro forma basis after
giving effect to the acquisition of AN Can, for 1995 the
-17-
Company's sales to Nestle and Del Monte would have declined to 33% of the
Company's total metal container sales.
The Company believes that it is likely that the unit volume for its
metal container business, on a pro forma basis after giving effect to the
acquisition of AN Can, will decline in 1996 and possibly in 1997 from the
aggregate volumes realized by the Company and AN Can on a stand-alone basis. The
Company believes that certain customers, who had a majority of their can
requirements supplied by the Company and AN Can, will seek additional suppliers.
Additionally, the Company is negotiating the extension of supply arrangements
with many customers, including the supply arrangements with Nestle that expire
in 1997, which would have represented approximately 6% of the Company's sales in
1995 on a pro forma basis after giving effect to the acquisition of AN Can.
There can be no assurance that the Company will be successful in its efforts to
maintain this volume on the same terms and conditions that currently exist.
The plastic container business has grown from a sales base of $89
million in 1987 to $220 million in 1995. In 1989, the Company acquired four
plastic container manufacturers to improve its competitive position in the
plastic container segment. As a result of these acquisitions, the Company
implemented an aggressive consolidation and rationalization program during the
period from 1991 through 1993, closing three manufacturing facilities and
consolidating the technical and administrative functions of its plastic
container business. An additional facility was closed in 1995. To gain further
production efficiencies, the Company has made significant capital investment in
its plastic container business over the past few years. In 1994, the Company
began to realize the benefits of the consolidation and rationalization program
as well as the capital investment program. Currently, the Company is
aggressively pursuing opportunities in custom-designed PET and HDPE containers
for which the market has been growing principally due to consumer preferences
for plastic containers. The Company believes that it has equipment and technical
expertise to take advantage of these growth segments.
In conjunction with the acquisition of AN Can, Silgan, Containers and
Plastics entered into a $675.0 million credit facility with various banks to
finance the acquisition of AN Can and the resulting increased seasonal working
capital needs of the Company's metal container business, to refinance in full
amounts owing under the Company's previous credit facility, to repay the Secured
Notes and to permit Silgan to advance to Holdings up to $75.0 million for the
repurchase by Holdings of Discount Debentures. Although the Company lowered its
interest rate spread under its new credit facility by 1/2%, the Company's total
interest expense will increase significantly from historical amounts because the
acquisition was financed entirely through bank borrowings and additional bank
borrowings were advanced to Holdings on a non-interest bearing basis to fund
Holdings' repurchase of its higher cost indebtedness.
-18-
Summary results for the Company's two business segments, metal and
plastic containers, for the calendar years ending December 31, 1995, 1994 and
1993 are provided below. See Note 20 of the Notes to Consolidated Financial
Statements which are included elsewhere in this Annual Report on Form 10-K.
1995 1994 1993
----- ----- ----
(Dollars in millions)
Net sales:
Metal containers and other $ 882.3 $657.1 $459.2
Plastic containers 219.6 204.3 186.3
------- ----- -----
Consolidated $1,101.9 $861.4 $645.5
======= ===== =====
Operating profit:
Metal containers and other $72.9 $67.0 $42.3
Plastic containers 13.2 9.4 0.6
Reduction in asset value (14.7) (16.7) --
Corporate expense (1.6) (1.3) (1.1)
----- ----- -----
Consolidated $69.8 $58.4 $41.8
==== ==== ====
- -----------------------------
For 1995, the total charge was allocable to the metal container
business. For 1994, $7.2 million of this charge was allocable to the
metal container business and $9.5 million was allocable to the plastic
container business.
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.
Results of Operations
Year Ended December 31, 1995 Compared with Year Ended December 31, 1994.
Consolidated net sales increased $240.5 million, or 27.9%, to $1.1
billion for the year ended December 31, 1995, as compared to sales of $861.4
million for the same period in 1994. This increase resulted from net sales of
$264.3 million generated by AN Can since its acquisition and a $15.3 million
increase in sales of plastic containers offset, in part, by a decline in sales
of metal containers to Silgan's existing customer base of $39.1 million.
Net sales for the metal container business (including its specialty
business) were $882.3 million for the year ended December 31, 1995, an increase
of $225.2 million from net sales of $657.1 million for the same period in 1994.
Excluding net sales of metal cans of $236.0 million generated by AN Can since
its acquisition, net sales of metal cans to the Company's customers were $609.5
million during the year ended December 31, 1995, as compared to $647.5 million
for the same period in 1994. Net sales to the Company's customers in 1995
decreased principally due to lower unit volume resulting from the below normal
1995 vegetable pack offset, in part, by slightly higher sales prices due to the
pass through of raw material cost increases.
Sales of specialty items included in the metal container segment
increased $27.2 million to $36.8 million during the year ended December 31, 1995
as compared to the same period in 1994, due to the acquisition of AN Can which
generated sales of $28.3 million of specialty items since its acquisition.
Net sales for the plastic container business of $219.6 million during
the year ended December 31, 1995 increased $15.3 million over net sales of
$204.3 million for the same period in 1994. This increase was attributable to
increased unit sales for new customer products and to higher average sales
prices due to the pass through of higher average resin costs.
-19-
Cost of goods sold as a percentage of consolidated net sales was 88.1%
($970.5 million) for the year ended December 31, 1995, an increase of 1.2
percentage points as compared to 86.9% ($748.3 million) for the same period in
1994. The increase in cost of goods sold as a percentage of net sales
principally resulted from increased per unit manufacturing costs resulting from
reduced can production volumes, lower margins realized on certain products due
to competitive market conditions and lower margins on sales made by AN Can,
offset, in part, by improved manufacturing operating efficiencies due to plant
consolidations and lower depreciation expense due to a change in the estimated
useful life of certain equipment.
Selling, general and administrative expenses as a percentage of
consolidated net sales declined 0.2 percentage points to 4.2% ($46.8 million)
for the year ended December 31, 1995 as compared to 4.4% ($38.0 million) for the
year ended December 31, 1994. The decrease in selling, general and
administrative expenses as a percentage of net sales resulted from the Company's
continued control of these expenses in respect of the Company's existing
business, offset partially by a temporarily higher level of expenses incurred
during the integration of AN Can. The Company expects that its selling, general
and administration costs as a percentage of sales will continue to decline in
1996 as it completes the integration of the administrative functions of its
metal container business.
Income from operations as a percentage of consolidated net sales was
6.3% ($69.8 million) for the year ended December 31, 1995, as compared with 6.8%
($58.4 million) for the same period in 1994. Included in income from operations
were charges for the write-off of certain underutilized assets of $14.7 million
and $16.7 million in 1995 and 1994, respectively. Without giving effect to these
charges, income from operations as a percentage of consolidated net sales would
have declined 1.0% in 1995, primarily as a result of the aforementioned decline
in gross margin.
Income from operations as a percentage of net sales for the metal
container business (without giving effect to charges of $14.7 million and $7.2
million in 1995 and 1994, respectively, to adjust the carrying value of certain
assets) was 8.3% ($72.9 million) for the year ended December 31, 1995, as
compared to 10.2% ($67.0 million) for the same period in the prior year. The
decrease in income from operations as a percentage of net sales principally
resulted from higher per unit manufacturing costs realized on lower production
volume, lower margins realized on certain products due to competitive market
conditions, inefficiencies caused by work stoppages at two of the Company's
California facilities, and lower margins realized on sales made by AN Can.
Income from operations as a percentage of net sales attributable to the
plastic container business (without giving effect to the charge of $9.5 million
in 1994 to adjust the carrying value of certain assets) was 6.0% ($13.2 million)
for the year ended December 31, 1995, as compared to 4.6% ($9.4 million) for the
same period in 1994. The operating performance of the plastic container business
improved as a result of production planning and scheduling efficiencies and
benefits realized from capital investment, offset, in part, by increased unit
production costs incurred as a result of an inventory reduction program.
Interest expense, including amortization of debt financing costs,
increased by approximately $14.9 million to $80.7 million for the year ended
December 31, 1995, principally as a result of increased borrowings to finance
the acquisition of AN Can and to fund higher working capital needs as a result
of the increased seasonality of the Company's metal container business, and
higher average interest rates. Accretion of interest on the Discount Debentures
in 1995 approximated the prior year's accretion due to the repurchase of $61.7
million face amount of Discount Debentures in the third quarter of 1995.
The provisions for income taxes for the years ended December 31, 1995
and 1994 were comprised of federal, state and foreign income taxes currently
payable. The decrease in the provision for income taxes in 1995 reflects a
decrease in federal income taxes currently payable due to the deductibility of
accrued interest on the Discount Debentures that were repurchased in 1995.
-20-
As a result of the items discussed above, net loss before the
extraordinary charge for the year ended December 31, 1995 was $16.0 million, as
compared to a net loss of $13.0 million for the year ended December 31, 1994.
As a result of the early extinguishment of amounts owed under its
secured debt facilities, the Company incurred an extraordinary charge of $5.8
million (net of tax of $2.6 million) in 1995.
Year Ended December 31, 1994 Compared with Year Ended December 31, 1993.
Consolidated net sales increased $215.9 million, or 33.4%, to $861.4
million for the year ended December 31, 1994, as compared to $645.5 million for
the same period in 1993. Approximately 81% of this increase related to sales to
Del Monte pursuant to the DM Supply Agreement entered into by the Company on
December 21, 1993 to supply substantially all of Del Monte's metal container
requirements for a period of ten years. The remainder of this increase resulted
principally from greater unit sales in both the metal container and plastic
container businesses.
Net sales for the metal container business (including paper containers)
were $657.1 million for the year ended December 31, 1994, an increase of $197.9
million (43.1%) over net sales for the metal container business of $459.2
million for the same period in 1993. Sales of metal containers increased $201.6
million primarily as a result of the DM Supply Agreement, which represented
$174.7 million of this increase, and an increase of $26.9 million in sales to
all other customers. Sales of metal containers increased principally from higher
unit volume and reflected continued growth in sales of pet food containers, as
well as greater sales to vegetable pack customers due to a larger than normal
pack in 1994. Sales of specialty items included in the metal container segment
declined $3.7 million to $9.6 million during 1994.
Net sales for the plastic container business of $204.3 million during
the year ended December 31, 1994 increased $18.0 million, or 9.7%, over net
sales of plastic containers of $186.3 million for the same period in 1993. The
increase in net sales of plastic containers was attributable to increased unit
sales to new and existing customers, particularly PET customers, and to a lesser
extent, higher average sales prices due to the pass through of increased resin
costs.
Cost of goods sold as a percentage of consolidated net sales was 86.9%
($748.3 million) for the year ended December 31, 1994, a decrease of 1.6
percentage points as compared to 88.5% of consolidated net sales ($571.2
million) for the same period in 1993. The decrease in cost of goods sold as a
percentage of consolidated net sales principally resulted from synergistic
benefits resulting from the acquisition of DM Can, lower per unit manufacturing
costs realized on higher sales and production volumes and improved manufacturing
efficiencies in the plastic container business resulting from larger cost
reduction and productivity investments in 1993.
Selling, general and administrative expenses as a percentage of
consolidated net sales declined 0.6 percentage points to 4.4% of consolidated
net sales ($38.0 million) for the year ended December 31, 1994, as compared to
5.0% ($32.5 million) for the same period in 1993. The decrease as a percentage
of consolidated net sales resulted principally from a modest increase in
selling, general and administrative functions relative to the increased sales
associated with the acquisition of DM Can, offset in part by an increase of $1.3
million in benefits accrued under stock appreciation rights agreements.
Income from operations as a percentage of consolidated net sales
increased 0.3 percentage points to 6.8% ($58.4 million) for the year ended
December 31, 1994, compared with 6.5% ($41.8 million) for the same period in
1993. During 1994 the Company incurred a charge of $16.7 million to write-down
certain properties held for sale to their net realizable value and to reduce the
carrying value of certain technologically obsolete
-21-
and inoperable equipment. Without giving effect to this nonrecurring charge,
income from operations in 1994 would have been 8.7% ($75.1 million), an increase
of 2.2 percentage points as compared to 1993, and was principally attributable
to the aforementioned improvement in gross margin.
Income from operations as a percentage of net sales for the metal
container business (without giving effect to the $7.2 million charge to
write-down the carrying value of certain assets) increased 1.0% to 10.2% ($67.0
million) during 1994 as compared to 1993, principally due to operating synergies
realized from the acquisition of DM Can and lower per unit manufacturing costs
incurred as a result of higher production volumes in 1994. Income from
operations as a percentage of net sales attributable to the plastic container
business (without giving effect to the $9.5 million charge to write-down the
carrying value of certain assets) in 1994 was 4.6% ($9.4 million), as compared
to 0.3% ($0.6 million) in 1993. The improved operating performance of the
plastic container business resulted from production efficiencies realized as a
result of rationalizations and capital investment made in prior periods, and
lower unit manufacturing costs.
Interest expense, including amortization of debt financing costs,
increased by approximately $11.5 million to $65.8 million for the year ended
December 31, 1994. This increase resulted from the incurrence of additional bank
borrowings to finance the acquisition of DM Can, higher average bank borrowing
rates, higher accretion of interest on the Discount Debentures and increased
charges for the amortization of debt financing costs.
The provisions for income taxes for the years ended December 31, 1994
and 1993 were comprised of federal, state and foreign income taxes currently
payable. The increase in the provision for income taxes in 1994 reflects an
increase in federal income taxes currently payable. During 1994, the Company
fully utilized its alternative minimum tax net operating loss carryovers and,
therefore, was subject to tax at the rate of 20% on its alternative minimum
taxable income. Without the benefit of its alternative minimum tax net operating
loss carryovers, the Company expects that its provision for federal income taxes
payable in 1995 will approximate $10 million (assuming redemption of the
Discount Debentures at maturity) and increase annually thereafter.
As a result of the items discussed above, the net loss for the year
ended December 31, 1994 was $13.0 million, $1.4 million less than the loss
before extraordinary charges and cumulative effect of changes in accounting
principles for the year ended December 31, 1993 of $14.4 million.
In conjunction with the acquisition of DM Can in 1993, the Company
incurred an extraordinary charge of $1.3 million for the early extinguishment of
debt. Also, during 1993 the Company adopted SFAS No. 106, SFAS No. 109 and SFAS
No. 112. The cumulative effect of these accounting changes, for years prior to
1993, was to decrease net income by $6.3 million. As a result of these charges,
the net loss for 1993 was $22.0 million.
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, 1995 as compared to the year
ended December 31, 1994, after giving effect to the acquisition of AN Can as of
the beginning of the periods presented.
The following table sets forth, for the years ended December 31, 1995
and 1994, certain consolidated pro forma data. The pro forma data includes the
historical results of the Company and AN Can and reflects the effect of purchase
accounting adjustments based on preliminary appraisals and valuations, the
financing of the acquisition of AN Can, the refinancing of certain of the
Company's debt obligations, and certain other adjustments as if these events
occurred as of the beginning of the periods presented. The pro forma adjustments
-22-
are based upon available information and upon certain assumptions that the
Company believes are reasonable. The purchase price allocation will be finalized
within one year of the closing of the acquisition of AN Can and may differ from
that used for the pro forma data. Differences between actual and preliminary
valuations will cause adjustments to the AN Can purchase price allocation.
Estimated items subject to change include employee benefit costs and termination
costs associated with plant rationalizations and administrative workforce
reductions and other plant exit costs. 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 these transactions in fact
occurred on the dates or at the beginning of the periods 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, 1995 and 1994.
Pro Forma
---------
1995 1994
---- ----
(Dollars in millions)
Net sales $1,404.4 $1,458.0
Income from operations 97.4(1) 63.0(2)
Income (loss) before income taxes 8.7 (26.6)
Net income (loss) 1.5 (29.3)
- -----------------------------
(1) Included in pro forma income from operations for the year ended December
31, 1995 is a charge incurred by the Company of $14.7 million to adjust
the carrying value of certain underutilized equipment to net realizable
values.
(2) Included in pro forma income from operations for the year ended December
31, 1994 are charges incurred by AN Can of $10.1 million for shut down
costs necessary to realign the assets of the business more closely with
the existing customer base, charges of $16.7 million related to Silgan
and $7.1 million related to AN Can to adjust the carrying value of
certain technologically obsolete and inoperable equipment to realizable
value, and a charge of $26.7 million for the write-down of goodwill by
AN Can.
Without giving effect to the unusual items affecting pro forma income
from operations as set forth above, pro forma income from operations would have
been $112.1 million for the year ended December 31, 1995 as compared to $123.6
million in 1994. Management believes that pro forma income from operations in
1995 declined $11.5 million as compared to the prior year primarily as a result
of lower demand in 1995 for vegetable pack containers.
Excluding the unusual items referred to above, pro forma net income
would have been $11.7 million for the year ended December 31, 1995, $6.8 million
lower than in 1994. Management believes that this decline resulted from reduced
demand for vegetable pack containers as referred to above.
Capital Resources and Liquidity
The Company's liquidity requirements arise primarily from its
obligations under the indebtedness incurred in connection with its acquisitions
and the refinancing of such indebtedness, capital investment in new and existing
equipment and the funding of the Company's seasonal working capital needs.
Historically, the Company has met these liquidity requirements through cash flow
generated from operating activities and working capital borrowings. As described
below, beginning in December 1996 the Company's liquidity requirements will also
be affected by the interest associated with Holdings' indebtedness.
On August 1, 1995, Silgan, Containers and Plastics entered into a $675.0
million credit facility with various banks to finance the acquisition by
Containers of AN Can, to refinance and repay in full all amounts
-23-
owing under the 1993 Credit Agreement and the Secured Notes and to make
non-interest bearing advances to Holdings in an amount not to exceed $75.0
million for the repurchase of a portion of the Discount Debentures. The Credit
Agreement provides the Company with $225.0 million of A term loans, $225.0
million of B term loans and a working capital facility which will provide the
Company with borrowing availability of up to $225.0 million. With the proceeds
received from the Credit Agreement, the Company (i) repaid $117.1 million of
term loans under the 1993 Credit Agreement, (ii) repaid in full $50.0 million of
its Secured Notes, (iii) acquired from ANC substantially all of the fixed assets
and working capital of AN Can for $348.8 million (excluding $15.2 million for
the St. Louis operations which the Company expects to purchase by mid-1996), and
(iv) incurred debt issuance costs of $19.3 million.
The Credit Agreement provides the Company with improved financial
flexibility by (i) enabling Silgan to transfer funds to Holdings for payment by
Holdings of cash interest on the Discount Debentures, (ii) extending the
maturity of the Company's secured debt facilities until December 31, 2000, (iii)
lowering the interest rate spread on its floating rate borrowings by 1/2%, as
well as providing for further interest rate reductions in the event the Company
attains certain financial targets, and (iv) lowering the Company's average cost
of indebtedness by permitting the repurchase of up to $75.0 million of Holdings
Discount Debentures with borrowings under the Credit Agreement.
The Credit Agreement permits Silgan, at any time prior to June 30, 1996,
to borrow up to $75.0 million of working capital loans to fund the repurchase by
Holdings of Discount Debentures. The commitment under the Credit Agreement for
working capital loans was initially $150.0 million, and increased at the time
and by the amount of any such advances made by Silgan. During 1995, Silgan
advanced $57.6 million to Holdings for the repurchase by Holdings of a portion
of its outstanding Discount Debentures, thereby increasing the commitment under
the revolving credit facility to $207.6 million by year end. Silgan may fund
further advances to Holdings of up to $17.4 million through borrowings of
working capital loans to enable Holdings to make additional repurchases of
Discount Debentures prior to June 30, 1996.
During 1995, cash generated from operations of $209.6 million (including
cash of $112.0 million generated by AN Can since August 1, 1995), proceeds of
$3.5 million realized from the sale of assets and a decrease of $0.6 million in
cash balances were used to repay $142.8 million of working capital borrowings
used to fund the acquisition of AN Can, fund capital expenditures of $51.9
million, repay $9.7 million of term loans and $5.5 million of working capital
loans, and make payments to former shareholders of $3.8 million in full
settlement of outstanding litigation. The Company's earnings before
depreciation, interest, taxes and amortization ("EBDITA") for the year ended
December 31, 1995 increased by $17.9 million to $132.4 million as compared to
1994. The increase in EBDITA reflected the generation of additional cash
earnings from AN Can since its acquisition on August 1, 1995, offset by a
decline in the cash earnings of the Company's existing business principally as a
result of lower unit volume due to the below normal 1995 vegetable pack.
For the year ended December 31, 1995, the operating cash flow of the
Company increased significantly from the prior year due to the generation of
cash by AN Can since its acquisition on August 1, 1995 and the adoption by
Silgan of similar year-end vendor payment terms to those of AN Can. At December
31, 1995, the trade receivable balance of AN Can was $44.2 million ($90.2
million on August 1, 1995), the inventory balance was $98.9 million ($137.9
million on August 1, 1995), and the trade payables balance was $58.2 million
($64.2 million on August 1, 1995).
During 1994, cash generated from operations of $47.3 million along with
working capital borrowings of $10.4 million were used to fund capital
expenditures of $27.9 million (net of proceeds of $1.3 million), make mandatory
debt repayments of $20.5 million, pay $6.9 million to former shareholders of
Silgan in partial settlement of outstanding litigation and increase cash
balances by $2.4 million.
-24-
On December 21, 1993, Silgan, Containers and Plastics entered into the
1993 Credit Agreement to finance the acquisition of DM Can and to refinance and
repay in full all amounts owing under the Company's previous 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 its previous 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.
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. The acquisition of AN Can increased Silgan's seasonal metal
containers business, and as a result the Company increased the amount of working
capital loans available to it under its credit facility to $225.0 million. 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 $185 million of the working capital revolver, including
letters of credit, will be utilized at its peak in July 1996.
As of December 31, 1995, the outstanding principal amount of working
capital loans was $7.1 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 $193.9 million.
In addition to its operating cash needs, the Company's cash requirements
over the next several years consist primarily of (i) annual capital expenditures
of $45.0 to $55.0 million, (ii) scheduled principal amortization payments of
term loans under the Credit Agreement of $27.3 million, $37.3 million, $52.3
million, $52.3 million and $102.5 million over the next five years,
respectively, (iii) expenditures of approximately $30.0 million over the next
three years associated with plant rationalizations and administrative workforce
reductions, other plant exit costs and employee relocation costs of AN Can, (iv)
the Company's interest requirements, including interest on working capital
loans, the principal amount of which will vary depending upon seasonal
requirements, and the term loans, all of which bear fluctuating rates of
interest, the 11-3/4% Notes and semi-annual cash interest payments of up to
$14.1 million (which amount may be reduced depending upon the amount of Discount
Debentures repurchased or redeemed by Holdings) on the Discount Debentures
commencing in December 1996, and (v) payments of approximately $10.0 million for
federal and state tax liabilities in 1996 (assuming the redemption of the
remainder of the Discount Debentures at maturity) and increasing annually
thereafter.
Interest on the Discount Debentures is payable at a rate of 13-1/4% per
annum from and after June 15, 1996, and commencing on December 15, 1996
semi-annual interest payments of up to $14.1 million will be required to be made
thereon. Since Holdings' only asset is its investment in Silgan, its ability to
pay interest
-25-
on the Discount Debentures on and after December 15, 1996 (the date on which
interest is first payable on the Discount Debentures) may depend upon its
receipt of funds paid by dividend or otherwise loaned, advanced or transferred
by Silgan to Holdings. While Silgan has no legal obligation to make such funds
available, it is expected that Silgan will do so if it then has sufficient funds
available for such purpose. If sufficient funds to pay such interest are not
generated by the operations of Silgan's subsidiaries, Silgan or Holdings may
seek to borrow or otherwise finance the amount of such payments or refinance the
Discount Debentures. Neither the Indenture for the 11-3/4% Notes nor the Credit
Agreement limits the ability of Silgan to pay cash dividends to Holdings in
order to enable Holdings to pay interest on the Discount Debentures. The funding
requirements of Holdings to service its indebtedness (beginning in December
1996) will 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.
In addition to any financing effected as described above, the Company
may consider refinancing all or any part of its indebtedness through other debt
financings and/or equity financings, including a public offering of equity. Any
such financings would depend upon the market conditions existing at the time and
would have to be effected in compliance with the Company's agreements in respect
of its indebtedness.
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 (approximately $85.0 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, as of December 31,
1995, amounts to approximately $100 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") and,
due to the utilization of its AMT net operating loss carryforwards, incurred an
AMT liability at a rate of 2%. In 1994, Holdings fully utilized its AMT loss
carryforward. Accordingly, in 1995 Holdings incurred, and thereafter Holdings
will incur, an AMT liability at a rate of 20% (or the applicable rate then in
effect). The AMT paid is allowed (subject to certain limitations) 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 on the Discount Debentures 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).
During 1995, Holdings repurchased $61.7 million face amount of Discount
Debentures, providing Holdings with an allowable deduction of approximately
$18.0 million for the amount of interest accreted on such indebtedness. 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
-26-
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 for the foreseeable future.
The Credit Agreement 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 1996 with all such covenants.
Effect of Interest Rate Fluctuations and Inflation
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.
Because the Company has indebtedness which bears interest at floating
rates, the Company's financial results will be sensitive to changes in
prevailing market rates of interest. As of December 31, 1995, the Company had
$786.1 million of indebtedness outstanding, of which $449.9 million was
indebtedness bearing interest at floating rates. To mitigate the effect of
interest rate fluctuations, the Company entered into interest rate swap
agreements during the first quarter of 1996 whereby floating rate interest was
exchanged for fixed rates of interest ranging from 8.1% to 8.6%. The notional
principal amounts of these agreements totaled $100.0 million and mature in the
year 1999. Depending upon market conditions, the Company may enter into
additional interest rate swap agreements or other interest rate hedge agreements
(with counterparties that, in the Company's judgment, have sufficient
creditworthiness) during 1996 to hedge its exposure against interest rate
volatility.
New Accounting Pronouncements
Long-Lived Asset Impairment. In March 1995, the Financial Accounting
Standard Board ("FASB") issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of", effective for
the 1996 fiscal year. As required by SFAS No. 121, impairment losses will be
recognized when events or changes in circumstances indicate that the fair value
of identifiable assets is less than the carrying amount. In making such a
determination, the Company will compare the undiscounted cash flows generated by
specific assets to the carrying value of such assets. The Company will adopt
SFAS No. 121 in 1996 and believes the effect of adoption of SFAS No. 121 will
not be material. See Note 5 to the Consolidated Financial Statements of the
Company included elsewhere in this Annual Report on Form 10-K.
Stock-Based Compensation. In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation", effective for the 1996 fiscal year.
Under SFAS No. 123, compensation expense for all stock-based compensation plans
would be recognized based on the fair value of the options at the date of grant
using an option pricing model. As permitted under SFAS No. 123, the Company may
either adopt the new pronouncement or follow the current accounting methods as
prescribed under APB No. 25. The Company does not intend to adopt SFAS No. 123
for expense recognition purposes in 1996. See Note 15 to the Consolidated
Financial Statements of the Company included elsewhere in this Annual Report on
Form 10-K.
-27-
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.
-28-
PART III
Item 10. Directors and Executive Officers of the Registrant.
Directors and Executive Officers 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 1996 History and Other Directorships Held
----------------- -------- ------------------------------------
R. Philip Silver 53 Prior to forming S&H, Inc.
Chairman of the Board ("S&H") in 1987, President of
and Co-Chief Continental Can Company from
Executive Officer of June 1983 to August 1986;
Holdings and Silgan consultant to packaging industry
since March 1994; from August 1986 to August 1987;
formerly President of Vice Chairman of the Board and
Holdings and Silgan; Director of Sweetheart Holdings
Director of Holdings Inc. and Sweetheart Cup Company,
since April 1989 and Inc. from September 1989 to
of Silgan since August January 1991; Chairman of the
1987; Chairman of the Board and Director of Sweetheart
Board of Plastics since Holdings Inc. and Sweetheart Cup
March 1994; Director Company, Inc. from January 1991
of Containers and through August 1993; Director,
Plastics since August Johnstown America Corporation.
1987.
D. Greg Horrigan 52 Prior to forming S&H in 1987,
President and Co- Executive Vice President and
Chief Executive Operating Officer of Continental Can
Officer of Holdings Company from 1984 to 1987;
and Silgan since Chairman of the Board and Director
March 1994; formerly of Sweetheart Holdings Inc. and
Chairman of the Board Sweetheart Cup Company, Inc. from
of Holdings and September 1989 to January 1991;
Silgan; Director of Vice Chairman of the Board and
Holdings since April Director of Sweetheart Holdings Inc.
1989 and of Silgan and Sweetheart Cup Company, Inc.
since August 1987; from January 1991
Chairman of the Board through August 1993.
of Containers since
August 1987; Director
of Containers and
Plastics since August
1987.
-29-
Age at
March 15, Five-Year Employment
Name and Position 1996 History and Other Directorships Held
----------------- -------- ------------------------------------
James S. Hoch 35 Executive Director of Morgan
Director, Vice Stanley & Co., Ltd. since 1994;
President and Assistant Principal of Morgan Stanley & Co.
Secretary of Holdings Incorporated since 1993; Vice
since January 1991; President of Morgan Stanley & Co.
Director of Silgan Incorporated from 1991 to 1993
since January 1991; and of MSLEF II since 1991.
Vice President and Director of Sullivan
Assistant Secretary of Communications, Inc., Sullivan
Silgan since 1987; Graphics, Inc., Nokia Aluminium
Director, Vice Oy, Kabelmedia GmbH and Sita
President and Assistant Telecommunications Holdings
Secretary of N.V.
Containers since
January 1991;
Director, Vice
President and Assistant
Secretary of Plastics
since January 1991.
Robert H. Niehaus 40 Managing Director of Morgan
Vice President, Stanley & Co. Incorporated since
Assistant Secretary January 1, 1990; joined Morgan
and Director of Stanley & Co. Incorporated in
Holdings since April 1982. Vice President and Director
1989; Vice President, of MSLEF II, Inc. since January
Assistant Secretary 1990; Vice Chairman and Director
and Director of Silgan of MSCP III since January 1994.
since August 1987; Director of American Italian Pasta
Vice President, Company, Fort Howard
Assistant Secretary Corporation, PSF Finance
and Director of Holdings, Inc., Randall's Food
Containers and Markets, Inc. and Waterford
Plastics since August Crystal Ltd., and Chairman of
1987. Waterford Wedgewood UK plc.
Harley Rankin, Jr. 56 Prior to joining the Company,
Executive Vice Senior Vice President and Chief
President and Chief Financial Officer of Armtek
Financial Officer of Corporation; prior to Armtek
Holdings since April Corporation, Vice President and
1989; Treasurer of Chief Financial Officer of
Holdings since January Continental Can Company from
1992; Executive Vice November 1984 to August 1986.
President and Chief Vice President, Chief Financial
Financial Officer of Officer and Treasurer of
Silgan since January Sweetheart Holdings Inc. and Vice
1989; Treasurer of President of Sweetheart Cup
Silgan since January Company, Inc. from September
1992; Vice President 1989 to August 1993.
of Containers and
Plastics since January
1989; Treasurer of
Plastics from January
1994 to December
1994.
-30-
Age at
March 15, Five-Year Employment
Name and Position 1996 History and Other Directorships Held
----------------- -------- ------------------------------------
Harold J. Rodriguez, Jr. 40 Employed by Ernst & Young from
Vice President of 1978 to 1987, last serving as Senior
Holdings and Silgan Manager specializing in taxation.
since March 1994; Controller, Assistant Secretary and
Vice President of Assistant Treasurer of Sweetheart
Containers and Holdings Inc. and Assistant
Plastics since March Secretary and Assistant Treasurer of
1994; Controller and Sweetheart Cup Company, Inc. from
Assistant Treasurer of September 1989 to August 1993.
Holdings and Silgan
since 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.
Glenn A. Paulson 52 Employed by ANC from January
Vice President of 1990 to July 1995, last serving as
Holdings and Silgan Senior Vice President and General
since January 1996; Manager, Food Metal and
employed by Specialty, North America; prior to
Containers to manage ANC, President of the beverage
the ANC transition packaging operations of
from August 1995 to Continental Can Company.
December 1995.
Management of Metal Container Business
In addition to the persons listed under "--Directors and Executive
Officers Holdings" above, the following are the principal executive officers of
Containers:
Age at
March 15, Five-Year Employment
Name and Position 1996 History and Other Directorships
----------------- -------- -------------------------------
Held
----
James D. Beam 53 Vice President - Marketing & Sales of
President and a Containers from September 1987 to July
non-voting 1990; Vice President and General
Director of Manager of Continental Can Company,
Containers since Western Food Can Division, from
July 1990. March 1986 to September 1987.
Gerald T. Wojdon 60 General Manager of Manufacturing of
Vice President - the Can Division of The Carnation
Operations and Company from August 1982 to August
Assistant 1987.
Secretary of
Containers since
September 1987.
-31-
Age at
March 15, Five-Year Employment
Name and Position 1996 History and Other Directorships
----------------- -------- -------------------------------
Held
----
Gary M. Hughes 53 Vice President, Sales and Marketing of
Vice President - the Beverage Division of Continental
Sales & Can Company from February 1988 to
Marketing of July 1990; prior to February 1988, was
Containers since employed by Continental Can in various
July 1990. regional sales positions.
Dennis Nerstad 58 Vice President of Containers from
Vice President - December 1993 to June 1994. Vice
Production President - Distribution and Container
Services of Manufacturing of Del Monte from
Containers since August 1989 to December 1993;
July 1994. 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.
Joseph A. Heaney 43 Controller, Food Metal and Specialty
Vice President - Division of ANC from September 1990
Finance of to October 1995. From August 1977 to
Containers since August 1990, employed by ANC and
October 1995. American Can Company in various
divisional, regional and plant
finance/accounting positions.
Management of Plastic Container Business
In addition to the persons listed under "--Directors and Executive
Officers of Holdings" above, the following are the principal executive officers
of Plastics:
Age at
March 15, Five-Year Employment
Name and Position 1996 History and Positions
----------------- -------- -----------------------
Russell F. Gervais 52 President and Chief Executive
President and non- Officer of Aim Packaging, Inc. from
voting Director of March 1984 to September 1989.
Plastics since
December 1992; Vice
President - Sales &
Marketing of Plastics
from September 1989
until December 1992.
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Howard H. Cole 50 Manager of Personnel of Monsanto
Vice President and Engineered Products Division of the
Assistant Secretary of Monsanto Company from April 1986
Plastics since to September 1987.
September 1987.
Charles Minarik 58 President of Wheaton Industries
Vice President - Plastics Group from February 1991
Operations and to August 1992; Vice President -
Commercial Marketing of Constar International,
Development of Inc. from March 1983 to February
Plastics since May 1991.
1993.
Alan H. Koblin 44 Vice President of Churchill
Vice President - Sales Industries from 1990 to 1992.
& Marketing of
Plastics since 1994,
Director of Sales &
Marketing of Plastics
from 1992 to 1994.
Colleen J. Jones 36 Audit Manager, Arthur Young &
Vice President - Company from July 1982 to July
Finance and Chief 1989.
Financial Officer of
Plastics since
December 1994,
Assistant Secretary of
Plastics since
November 1993,
Corporate Controller
of Plastics from
October 1993 to
December 1994,
Manager - Finance of
Plastics from July
1989 to October
1993.
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
during the fiscal years ended December 31, 1995, 1994 and 1993 of those persons
who at December 31, 1995 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."
-33-
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------------------------------- ------------
Awards
------
Other Securities
Annual Underlying Stock All Other
Name and Principal Position Year Salary Bonus Compensation Options/SARs Compensation
- --------------------------- ---- ------------ ----------- ------------ --------------- ---------------
R. Philip Silver 1995 $1,830,000 - - - -
(Chairman of the Board and 1994 1,684,135 - - - -
Co-Chief Executive Officer of 1993 1,608,799 - - - -
Holdings and Silgan and Chairman
of the Board of Plastics)
D. Greg Horrigan 1995 1,830,000 - - - -
(President and Co-Chief 1994 1,684,135 - - - -
Executive Officer of Holdings 1993 1,608,799 - - - -
and Silgan and Chairman of
the Board of Containers)
Harley Rankin, Jr. 1995 408,978 - - - -
(Executive Vice President, 1994 384,930 - - 6,000 -
Chief Financial Officer and 1993 347,598 - - - -
Treasurer of Holdings and
Silgan and Vice President of
Containers and Plastics)
James D. Beam 1995 361,200 - - - $66,394
(President of Containers) 1994 350,000 $169,092 - - 94,175
1993 239,949 65,277 - - 24,883
Russell F. Gervais 1995 226,000 59,000 - - 5,085
(President of Plastics) 1994 216,804 83,300 - 600 -
1993 210,000 - - - -
- -------------------
The compensation of Messrs. Horrigan, Silver, Rankin and Rodriguez
reflects amounts as earned and was paid by S&H. Such persons received no
direct compensation from Holdings, Silgan or their respective
subsidiaries. See "Certain Transactions--Management Agreements."
The salaries of Messrs. Beam and Gervais were paid by Containers and
Plastics, respectively.
Bonuses of Messrs. Beam and Gervais were earned by them in such year and
paid in the following year, pursuant to the Silgan Containers
Corporation Performance Incentive Plan and the Silgan Plastics
Corporation Incentive Plan, respectively. Under such plans, executive
officers and other key employees of Containers and Plastics may be
awarded cash bonuses provided that such company achieves certain
assigned financial targets.
Reflects options to purchase shares of Holdings Class C Stock granted
under the Silgan Holdings Inc. Third Amended and Restated 1989 Stock
Option Plan (the "Holdings Plan") in the case of Mr. Rankin, and options
to purchase, and tandem SARs relating to, shares of Plastics' common
stock granted under the Silgan Plastics Corporation 1994 Stock Option
Plan (the "Plastics Plan") in the case of Mr. Gervais. Such options and
tandem SARs are exercisable ratably over a five-year period beginning on
January 1, 1995.
In the case of Mr. Beam, includes for 1995 and 1994 amounts contributed
under the Silgan Containers Corporation Supplemental Executive
Retirement Plan (the "Supplemental Plan") and used to pay premiums for
split-dollar life insurance for Mr. Beam maintained in conjunction with
the Supplemental Plan and includes amounts contributed by Containers
under the Silgan Containers Corporation Deferred Incentive Savings Plan.
In the case of Mr. Gervais, includes amounts allocated to Mr. Gervais
under the Silgan Plastics Corporation Contributory Retirement Plan.
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OPTION/SAR VALUES AT DECEMBER 31, 1995
--------------------------------------
Value of Unexercised
Number of Securities Underlying in-the-Money
Unexercised Options/SARs at Options/SARs at
December 31, 1995 December 31, 1995
----------------- -----------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
R. Philip Silver..................... -- -- -- --
D. Greg Horrigan..................... -- -- -- --
Harley Rankin, Jr. .............. 12,400 3,600 $250,000 --
James D. Beam ............... 480 -- 918,601 --
Russell F. Gervais .............. 240 360 -- --
- -------------------
Options are for shares of Holdings Class C Stock. Value is determined
based upon the excess of the fair market value of Holdings Class C Stock
(determined based on the most recent sale by Holdings of its stock) over
the exercise price. The most recent sale by Holdings of its stock closed
in December 1993 and was of Holdings Class B Stock. See
"Business--Company History" and "Security Ownership of Certain
Beneficial Owners and Management--Description of Holdings Common Stock."
Such value may not be indicative of the value of Holdings Class B Stock
on the date hereof or of Holdings Class C Stock. In the event of a
public offering by Holdings, value would be based upon fair market value
as determined under the Holdings Plan.
Options are for, and tandem SARs relate to, shares of Containers' common
stock. As of December 31, 1995, 13,754 shares of Containers' common
stock are issued and outstanding and an additional 1,200 shares of
Containers' common stock are authorized for issuance under the Silgan
Containers Corporation Second Amended and Restated 1989 Stock Option
Plan (the "Containers Plan"). Value is determined based upon 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 by Holdings or a
change of control of Holdings, such options and tandem SARs would be
converted into options and tandem SARs under the Holdings Plan as
provided in the Containers Plan, and value would be based on fair market
value as determined under the Holdings Plan.
240 options and tandem SARs were granted in June 1989 under the
Containers Plan and an additional 240 options and tandem SARs were
granted in July 1990 under the Containers Plan. The book value, as
computed under the Containers Plan, for the shares underlying the
options and tandem SARs exceeds the exercise price therefor.
Options are for, and tandem SARs relate to, shares of Plastics' common
stock. As of December 31, 1995, 13,800 shares of Plastics' common stock
are issued and outstanding and an additional 1,200 shares of Plastics'
common stock are authorized for issuance under the Plastics Plan. The
options and related SARs are not exercisable until a public offering by
Holdings or a change of control of Holdings shall have occurred. At the
time of such public offering or change of control, such options and
tandem SARs would be converted into options and tandem SARs under the
Holdings Plan as provided in the Plastics Plan, and value would be based
upon the fair market value of such options and tandem SARs as determined
under the Holdings Plan.
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 following table illustrates the estimated annual normal retirement
benefits that are payable under the Containers Pension Plan. Such benefit levels
assume retirement at age 65, the years of service shown,
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continued existence of the Containers Pension Plan without substantial change
and payment in the form of a single life annuity.
Containers Pension Plan Table
-----------------------------
Years of Service
Final Average ------------------------------------------------------------------------------------------------------------------
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
Benefits under the Containers Pension Plan are based on the
participant's average base pay (the "Salary" column in the Summary Compensation
Table) over the final three years of employment. The amount of average base pay
taken into account for any year is limited by Section 401(a)(17) of the Code,
which imposes a cap of $150,000 (to be indexed for inflation) on compensation
taken into account for 1994 and later years (the limit for 1993 was $235,840).
As of December 31, 1995, the years of credited service under the
Containers Pension Plan for the eligible executive officer named in the Summary
Compensation Table is as follows: James D. Beam, 8. Mr. Beam also participates
in the Supplemental Plan, which is designed to make up for benefits not payable
under the Containers Pension Plan due to Internal Revenue Code limitations. Mr.
Beam's benefits under the Supplemental Plan are funded through a split-dollar
life insurance policy; income attributable to this life insurance policy is
included in the "All Other Compensation" column of the Summary Compensation
Table.
The following table illustrates the estimated annual normal retirement
benefits that are payable under the Plastics Pension Plan. 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.
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
Benefits under the Plastics Pension Plan are based on the participant's
average total cash compensation (the "Salary" and "Bonus" columns in the Summary
Compensation Table) over the final 36 months of
-36-
employment or over the highest three of the final five calendar years of
employment, which ever produces the greater average compensation. In computing
the average, compensation for any year cannot exceed 125% of base pay.
Compensation used in determining benefits is also limited by Section 401(a)(17)
of the Code, which imposes a cap of $150,000 (to be indexed for inflation) on
compensation taken into account for 1994 and later years (the limit for 1993 was
$235,840).
Benefits under the Plastics Pension Plan may be offset by a social
security amount (the plan provides benefits based on the greater of three
formulas, only one of which provides for a social security offset). Each of the
benefit estimates in the above table is based on the formula that produces the
greatest benefit for individuals with the stated earnings and years of service.
As of December 31, 1995, the years of credited service under the
Plastics Pension Plan for the eligible executive officer named in the Summary
Compensation Table is as follows: Russell F. Gervais, 6.
Certain Employment Agreements
Certain executive officers and other key employees of Containers and
Plastics (including Messrs. Beam and Gervais) have executed employment
agreements. The initial term of each such employment agreement is generally
three years from its effective date and is automatically extended for successive
one year periods unless terminated pursuant to the terms of such agreement.
Generally, these employment agreements provide 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, 1996, certain
information with respect to the beneficial ownership by certain persons and
entities of outstanding shares of capital stock of Holdings:
-37-
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. ......... -- -- 12,400 -- -- 18.08% --
James D. Beam .............. -- -- -- -- -- -- --
Russell F. Gervais ......... . -- -- -- -- -- -- --
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 -- 18,600 100% -- 27.11% 38.48%
- -------------------
This column reflects the percentage ownership of voting common stock that
would exist if Holdings Class A Stock and Holdings Class B Stock were
treated as a single class. Holdings Class C Stock 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, 1221 Avenue of the Americas, New York, NY
10020.
The address for such person is 4 Landmark Square, Stamford, CT 06901.
Reflects shares that may be acquired through the exercise of vested stock
options granted pursuant to Silgan Holdings Inc. Third 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 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 change of control of
Holdings. The address for such person is 21800 Oxnard Street, Woodland
Hills, CA 91367.
Options to purchase shares of common stock of Plastics and tandem SARs have
been granted to such person pursuant to the Plastics Plan. Pursuant to the
Plastics Plan, such options may be converted into stock options of Holdings
in the event of a public offering of any of Holdings' common stock or a
change of control of Holdings. The address for such person is 14515 N.
Outer Forty, Chesterfield, MO 63017.
The address for The Morgan Stanley Leveraged Equity Fund II, L.P., is 1221
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.
-38-
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 Restated Certificate of Incorporation of Holdings (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 Holdings Class A Stock, 667,500 shares of Holdings Class B
Stock and 1,000,000 shares of Holdings Class C 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
-39-
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) dispositions to certain parties, subject to certain other rights of first
refusal discussed below, (iv) 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 (v) 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 (iv) and (v) 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.
Under the Holdings Organization Agreement, 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, a company wholly
owned by Messrs. Silver and Horrigan, 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, Messrs. Silver and Horrigan and their respective affiliates
and certain related family transferees and estates, with Mr. Silver and his
affiliates and certain related family transferees and estates being deemed to be
collectively one member of the Group, and Mr. 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
-40-
same percentage of its stock to such Investment Entity or third party. 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. 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.
Under the Holdings Organization Agreement, 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.
At any time prior to December 21, 1998, Holdings has 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
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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
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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 Mr. Silver or Mr. Horrigan and the other person, if not
Mr. Silver or Mr. 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
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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 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).
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 $77.5 million for the calendar year 1995 and increases
by $6.0 million for each year thereafter. The Maximum Amount is $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.
-44-
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, 1995, 1994 and 1993, pursuant to the
arrangements described above, S&H earned aggregate fees, including reimbursable
expenses and fees payable to Morgan Stanley, of $5.4 million, $5.0 million and
$4.4 million, respectively, from Holdings, Silgan, Containers and Plastics, and
during 1995, 1994 and 1993 Morgan Stanley earned fees of $409,000, $383,000 and
$337,000, respectively.
Other
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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 refinancings of the Company's bank credit
agreement in 1995 and 1993, the banks thereunder (including Bankers Trust)
received certain fees amounting to $17.2 million and $8.1 million in 1995 and
1993, respectively.
G. William Sisley, Secretary of 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.
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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, 1995 and 1994............. ..... F-2
Consolidated Statements of Operations for the years ended December 31,
1995, 1994 and 1993....................................................... F-3
Consolidated Statements of Deficiency in Stockholders' Equity for the
years ended December 31, 1995, 1994 and 1993.............................. F-4
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993....................................................... F-5
Notes to Consolidated Financial Statements.................................. F-7
SILGAN CORPORATION:
Report of Independent Auditors............................................. F-38
Consolidated Balance Sheets at December 31, 1995 and 1994.................. F-39
Consolidated Statements of Operations for the years ended December 31,
1995, 1994 and 1993.................................................... F-40
Consolidated Statements of Common Stockholder's Equity for the years
ended December 31, 1995, 1994 and 1993................................... F-41
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993....................................... F-42
Notes to Consolidated Financial Statements................................. F-44
Schedules:
SILGAN HOLDINGS INC.:
I. Condensed Financial Information of Silgan Holdings Inc.:
Condensed Balance Sheets at December 31, 1995 and 1994............. F-73
Condensed Statements of Operations for the years ended
December 31, 1995, 1994 and 1993................................. F-74
Condensed Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993................................. F-75
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SILGAN CORPORATION:
I. Condensed Financial Information of Silgan Corporation:
Condensed Balance Sheets at December 31, 1995 and 1994............. F-76
Condensed Statements of Operations for the years ended
December 31, 1995, 1994 and 1993................................. F-77
Condensed Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993................................. F-78
II. Schedules of Valuation and Qualifying Accounts for the years ended
December 31, 1995, 1994 and 1993................................... F-79
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.
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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 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).
4.4 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).
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).
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Exhibit
Number Description
- ------- -----------
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 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).
10.8 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).
10.9 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).
10.10 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).
10.11 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).
10.12 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).
10.13 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).
10.14 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).
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Exhibit
Number Description
- ------- -----------
10.15 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).
10.16 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).
#10.17 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).
#10.18 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).
#10.19 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).
10.20 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).
10.21 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).
10.22 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).
10.23 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).
10.24 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
-51-
Exhibit
Number Description
- ------- -----------
January 11, 1988, Registration Statement No. 33-18719)
(Portions of this Exhibit are subject to confidential
treatment pursuant to order of the Commission).
10.25 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).
10.26 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).
10.27 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).
10.28 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).
10.29 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).
10.30 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).
10.31 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).
10.32 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).
10.33 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
-52-
Exhibit
Number Description
- ------- -----------
January 11, 1988, Registration Statement No. 33-18719)
(Portions of this Exhibit are subject to confidential
treatment pursuant to order of the Commission).
10.34 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).
10.35 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).
10.36 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).
10.37 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).
10.38 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).
10.39 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).
10.40 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).
10.41 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).
10.42 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
-53-
Exhibit
Number Description
- ------- -----------
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 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).
10.44 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).
10.45 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).
10.46 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).
10.47 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).
10.48 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).
10.49 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).
#10.50 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).
#10.51 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).
-54-
Exhibit
Number Description
- ------- -----------
10.52 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).
10.53 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).
10.54 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).
10.55 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).
10.56 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).
10.57 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).
10.58 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).
10.59 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).
10.60 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).
10.61 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).
10.62 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).
-55-
Exhibit
Number Description
- ------- -----------
10.63 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).
10.64 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).
10.65 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).
10.66 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).
10.67 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).
10.68 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).
10.69 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).
10.70 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).
10.71 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).
10.72 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).
-56-
Exhibit
Number Description
- ------- -----------
#10.73 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).
10.74 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).
10.75 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).
10.76 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).
10.77 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).
10.78 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).
10.79 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).
#10.80 Silgan Containers Corporation Second Amended and Restated
1989 Stock Option Plan (incorporated by reference to Exhibit
10.100 filed with Post-Effective Amendment No. 2 to the
Company's Registration Statement on Form S-1, dated May 11,
1994, Commission File No. 33-46499).
#10.81 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).
#10.82 Silgan Plastics Corporation 1994 Stock Option Plan
(incorporated by reference to Exhibit 10.102 filed with
Post-Effective Amendment No. 2 to the Company's Registration
Statement on Form S-1, dated May 11, 1994, Commission File
No. 33-46499).
#10.83 Form of Plastics Nonstatutory Restricted Stock Option and
Stock Appreciation Right Agreement (incorporated by
reference to Exhibit 10.103 filed with Post-Effective
Amendment No. 2 to the Company's Registration Statement on
Form S-1, dated May 11, 1994, Commission File No. 33-46499).
-57-
Exhibit
Number Description
- ------- -----------
#*10.84 Silgan Holdings Inc. Third Amended and Restated 1989 Stock
Option Plan.
#10.85 Form of 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).
10.86 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).
10.87 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).
10.88 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).
10.89 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).
#10.90 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).
#10.91 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).
#10.92 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).
#10.93 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).
10.94 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).
10.95 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
-58-
Exhibit
Number Description
- ------- -----------
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.)
10.96 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.)
10.97 Credit Agreement, dated as of August 1, 1995, among Silgan,
Containers, Plastics, the lenders from time to time party
thereto, Bankers Trust Company, as Administrative Agent and
as a Co-Arranger, and Bank of America Illinois, as
Documentation Agent and as a Co- Arranger (incorporated by
reference to Exhibit 2 filed with Holdings' Current Report
on Form 8-K, dated August 14, 1995, Commission File No.
33-28409).
10.98 Amended and Restated Holdings Guaranty, dated as of August
1, 1995, made by Holdings (incorporated by reference to
Exhibit 4 filed with Holdings' Current Report on Form 8-K,
dated August 14, 1995, Commission File No. 33-28409).
10.99 Amended and Restated Borrowers Guaranty, dated as of August
1, 1995, made by Silgan, Containers, Plastics,
California-Washington Can Corporation and SCCW Can
Corporation (incorporated by reference to Exhibit 3 filed
with Holdings' Current Report on Form 8-K, dated August 14,
1995, Commission File No. 33-28409).
10.100 Asset Purchase Agreement, dated as of June 2, 1995, between
ANC and Containers (incorporated by reference to Exhibit 1
filed with Holdings' Current Report on Form 8-K, dated
August 14, 1995, Commission File No. 33-28409).
*21 Subsidiaries of the Registrant.
*27 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
- --------------------
*Filed herewith
#Indicates a management contract or compensatory plan or arrangement in
accordance with Instruction 3 to Item 14 of Form 10-K.
-59-
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, 1996 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, 1996
- ------------------------
(R. Philip Silver)
President, Co-Chief Executive
/s/ D. Greg Horrigan Officer and Director March 29, 1996
- ------------------------
(D. Greg Horrigan)
-60-
Signature Title Date
- --------- ----- ----
Vice President, Assistant
/s/ James S. Hoch Secretary and Director March 29, 1996
- -----------------------
(James S. Hoch)
Vice President, Assistant
/s/ Robert H. Niehaus Secretary and Director March 29, 1996
- ----------------------
(Robert H. Niehaus)
Executive Vice President, Chief
Financial Officer and Treasurer
/s/ Harley Rankin, Jr. (Principal Financial Officer) March 29, 1996
- -----------------------
(Harley Rankin, Jr.)
Vice President, Controller and
Assistant Treasurer
/s/ Harold J. Rodriguez, Jr. (Principal Accounting Officer) March 29, 1996
- ----------------------------
(Harold J. Rodriguez, Jr.)
-61-
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ----------- -------
10.84 Silgan Holdings Inc. Third Amended and Restated 1989 Stock
Option Plan
21 Subsidiaries of the Registrant.
27 Financial Data Schedule.
TABLE OF CONTENTS
Page
----
PART I ................................................................... 1
Item 1. Business................................................ 1
Item 2. Properties............................................. 10
Item 3. Legal Proceedings...................................... 12
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............ 28
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... 28
PART III .................................................................. 29
Item 10. Directors and Executive Officers of the Registrant..... 29
Item 11. Executive Compensation................................. 33
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................. 37
Item 13. Certain Relationships and Related Transactions......... 44
PART IV .................................................................. 47
Item 14. Exhibits, Financial Statements, Schedules, and
Reports on Form 8-K.................................... 47
-i-
AFS95
FDS95>