UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from ________________ to ________________
Commission file number 000-22117
SILGAN HOLDINGS INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 06-1269834
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
4 Landmark Square
Stamford, Connecticut 06901
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (203) 975-7110
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
As of May 9, 2000, the number of shares outstanding of the registrant's common
stock, $0.01 par value, was 17,591,694.
SILGAN HOLDINGS INC.
TABLE OF CONTENTS
Page No.
--------
Part 1. Financial Information ...................................................................... 3
Item 1. Financial Statements .............................................................. 3
Condensed Consolidated Balance Sheets at March 31, 2000
and 1999 and December 31, 1999 ............................................... 3
Condensed Consolidated Statements of Income for the three months
ended March 31, 2000 and 1999 ................................................ 4
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2000 and 1999 ......................................... 5
Condensed Statements of Deficiency in Stockholders' Equity for
the three months ended March 31, 2000 ........................................ 6
Notes to Condensed Consolidated Financial Statements ............................ 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................................. 13
Item 3. Quantitative and Qualitative Disclosure About Market Risk ......................... 18
Part II. Other Information ......................................................................... 18
Item 6. Exhibits and Reports on Form 8-K .................................................. 18
Signatures .......................................................................................... 19
Exhibit Index ....................................................................................... 20
-2-
Part I. Financial Information
Item 1. Financial Statements
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, March 31, Dec. 31,
2000 1999 1999
---- ---- ----
(unaudited) (unaudited) (Note 1)
ASSETS
Current assets:
Cash and cash equivalents ............. $ 5,681 $ 2,593 $ 2,411
Trade accounts receivable, net ........ 153,974 150,318 128,095
Inventories ........................... 296,005 306,829 249,571
Prepaid expenses and other current
assets .............................. 9,723 9,582 8,864
---------- ---------- ----------
Total current assets .............. 465,383 469,322 388,941
Property, plant and equipment, net ...... 640,041 669,321 645,515
Other non-current assets, net ........... 154,618 155,814 150,829
---------- ---------- ----------
$1,260,042 $1,294,457 $1,185,285
========== ========== ==========
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable ................ $ 128,323 $ 126,257 $ 175,430
Accrued payroll and related costs ..... 55,828 45,507 56,100
Accrued interest payable .............. 15,957 15,291 10,998
Accrued expenses and other current
liabilities ........................ 22,594 21,904 25,093
Bank revolving loans .................. 110,849 126,800 --
Current portion of long-term debt ..... 39,342 33,915 39,351
---------- ---------- ----------
Total current liabilities ......... 372,893 369,674 306,972
Long-term debt .......................... 843,866 893,348 843,909
Other long-term liabilities ............. 86,828 93,713 83,138
Deficiency in stockholders' equity:
Common stock .......................... 202 199 201
Additional paid-in capital ............ 118,610 117,911 118,666
Accumulated deficit ................... (102,719) (126,317) (108,010)
Accumulated other comprehensive loss .. (320) (628) (273)
Treasury stock ........................ (59,318) (53,443) (59,318)
---------- ---------- ----------
Total deficiency in stockholders'
equity .......................... (43,545) (62,278) (48,734)
---------- ---------- ----------
$1,260,042 $1,294,457 $1,185,285
========== ========== ==========
See accompanying notes.
-3-
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per common share amounts)
Three Months Ended
------------------
March 31, March 31,
2000 1999
---- ----
Net sales .......................................... $410,657 $398,747
Cost of goods sold ................................. 361,939 350,888
-------- --------
Gross profit .................................. 48,718 47,859
Selling, general and administrative expenses ....... 19,063 17,755
-------- --------
Income from operations ........................ 29,655 30,104
Interest expense and other related financing
costs ........................................... 20,981 20,893
-------- --------
Income before income taxes .................... 8,674 9,211
Income tax provision ............................... 3,383 3,588
-------- --------
Net income .................................... $ 5,291 $ 5,623
======== ========
Per common share data:
Basic earnings per common share ............... $0.30 $0.31
===== =====
Diluted earnings per common share ............. $0.29 $0.30
===== =====
Weighted average shares used in computation (000's):
Basic ........................................ 17,552 18,193
Effect of dilutive employee stock options .... 482 533
------ ------
Diluted ...................................... 18,034 18,726
====== ======
See accompanying notes.
-4-
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
------------------
March 31, March 31,
2000 1999
---- ----
Cash flows from operating activities:
Net income ....................................... $ 5,291 $ 5,623
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation ................................. 20,817 20,080
Amortization ................................. 1,372 1,291
Changes in assets and liabilities:
(Increase) in trade accounts receivable.. (25,879) (16,314)
(Increase) in inventories ............... (46,434) (56,744)
(Increase) in other non-current assets .. (7,356) (2,406)
(Decrease) in trade accounts payable .... (47,107) (58,286)
Other, net .............................. 7,297 6,228
--------- ---------
Total adjustments ................... (97,290) (106,151)
--------- ---------
Net cash used in operating activities ........ (91,999) (100,528)
--------- ---------
Cash flows from investing activities:
Capital expenditures, net ........................ (15,662) (17,744)
--------- ---------
Net cash used in investing activities ........ (15,662) (17,744)
--------- ---------
Cash flows from financing activities:
Borrowings under revolving loans ................. 272,944 331,400
Repayments under revolving loans ................. (162,095) (204,600)
Proceeds from stock option exercises ............. 82 --
Purchases of treasury stock ...................... -- (10,688)
--------- ---------
Net cash provided by financing activities .... 110,931 116,112
--------- ---------
Net increase (decrease) in cash and cash
equivalents ..................................... 3,270 (2,160)
Cash and cash equivalents at beginning of year ........ 2,411 4,753
--------- ---------
Cash and cash equivalents at end of period ............ $ 5,681 $ 2,593
========= =========
Supplementary data:
Cash interest payments ........................... $ 15,673 $ 15,634
Cash income tax payments, net of refunds ......... 1,335 2,165
See accompanying notes.
-5-
SILGAN HOLDINGS INC.
CONDENSED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
(Dollars and shares in thousands)
Common Stock Accumulated Total
------------ Additional other deficiency in
Par paid-in Accumulated comprehensive Treasury stockholders'
Shares Value capital deficit income (loss) stock equity
------ ----- ------- ------- ------------- ----- ------
Balance at December 31, 1999 ............ 17,547 $201 $118,666 $(108,010) $(273) $(59,318) $(48,734)
Comprehensive income:
Net income ........................... 5,291 5,291
Foreign currency translation ......... (47) (47)
--------
Comprehensive income .................... 5,244
Proceeds from issuance of
common stock for employee
stock option exercises,
including income tax provision
of $137 ............................... 45 1 (56) (55)
------ ---- -------- --------- ----- -------- --------
Balance at March 31, 2000 ............... 17,592 $202 $118,610 $(102,719) $(320) $(59,318) $(43,545)
====== ==== ======== ========= ===== ======== ========
See accompanying notes.
-6-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2000 and 1999 and for the
three months then ended is unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Silgan
Holdings Inc. ("Holdings" or the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the accompanying financial statements include all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation. The results of operations for any interim period are not
necessarily indicative of the results of operations for the full year.
The condensed consolidated balance sheet at December 31, 1999 has been derived
from the Company's audited financial statements at that date, but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
The accompanying financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Holdings'
Annual Report on Form 10-K for the year ended December 31, 1999.
2. Rationalization and Acquisition Reserves
As part of its plan to integrate and rationalize the operations of its various
acquired businesses, the Company has established reserves for employee
termination and severance, plant exit costs and assumed liabilities. These costs
are expected to be incurred through 2001. Activity in the Company's
rationalization and acquisition reserves since December 31, 1999 is summarized
as follows:
Employee
Termination
and Plant Exit Assumed
Severance Costs Liabilities Total
----------- ---------- ----------- -----
(Dollars in thousands)
Balance at December 31, 1999 ..... $4,347 $10,750 $6,956 $22,053
Cash payments .................... -- (2,781) -- (2,781)
------ ------- ------ -------
Balance at March 31, 2000 ........ $4,347 $ 7,969 $6,956 $19,272
====== ======= ====== =======
-7-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2000 and 1999 and for the
three months then ended is unaudited)
2. Rationalization and Acquisition Reserves (continued)
Rationalization and acquisition reserves are included in the Condensed Balance
Sheets as follows:
March 31, December 31,
2000 1999
---- ----
(Dollars in thousands)
Accrued expense and other current liabilities ...... $11,157 $14,523
Other long-term liabilities ........................ 8,115 7,530
------- -------
$19,272 $22,053
======= =======
3. Comprehensive Income
Comprehensive income is reported in the Condensed Statements of Deficiency in
Stockholders' Equity. Amounts included in accumulated other comprehensive income
(loss) at March 31, 2000 and 1999 and December 31, 1999 consist of the
following:
March 31, March 31, Dec. 31,
2000 1999 1999
---- ---- ----
(Dollars in thousands)
Foreign currency translation .................. $(220) $(608) $(173)
Additional minimum pension liability .......... (100) (20) (100)
----- ----- -----
Accumulated other comprehensive loss ....... $(320) $(628) $(273)
===== ===== =====
The components of comprehensive income for the three months ended March 31, 2000
and 1999 are as follows:
March 31, March 31,
2000 1999
---- ----
(Dollars in thousands)
Net income .................................... $5,291 $5,623
Foreign currency translation .................. (47) 95
------ ------
Comprehensive income ....................... $5,244 $5,718
====== ======
-8-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2000 and 1999 and for the
three months then ended is unaudited)
4. Inventories
Inventories consisted of the following:
March 31, March 31, Dec. 31,
2000 1999 1999
---- ---- ----
(Dollars in thousands)
Raw materials ........................ $ 39,172 $ 52,473 $ 33,453
Work-in-process ...................... 49,496 41,894 49,799
Finished goods ....................... 188,515 193,809 148,135
Spare parts and other ................ 10,891 11,990 10,493
-------- -------- --------
288,074 300,166 241,880
Adjustment to value inventory
at cost on the LIFO Method ........ 7,931 6,663 7,691
-------- -------- --------
$296,005 $306,829 $249,571
======== ======== ========
5. Long-Term Debt
Long-term debt consisted of the following:
March 31, March 31, Dec. 31,
2000 1999 1999
---- ---- ----
(Dollars in thousands)
Bank debt:
Bank Revolving Loans ............... $236,049 $ 262,700 $125,200
Bank A Term Loans .................. 194,047 223,900 194,047
Bank B Term Loans .................. 190,495 192,449 190,495
Canadian Bank Facility ............. 14,260 15,808 14,312
-------- ---------- --------
Total bank debt ................. 634,851 694,857 524,054
Subordinated debt:
9% Senior Subordinated Debentures .. 300,000 300,000 300,000
13 1/4% Subordinated Debentures .... 56,206 56,206 56,206
Other .............................. 3,000 3,000 3,000
-------- ---------- --------
Total subordinated debt ......... 359,206 359,206 359,206
Total debt .............................. 994,057 1,054,063 883,260
Less: Amounts to be repaid within
one year ........................ 150,191 160,715 39,351
-------- ---------- --------
$843,866 $ 893,348 $843,909
======== ========== ========
-9-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2000 and 1999 and for the
three months then ended is unaudited)
5. Long-Term Debt (continued)
Under the Company's U.S. senior secured bank credit facility (the "U.S. Credit
Agreement"), the Company has available to it $545.5 million of bank revolving
loans. The Company also has $4.5 million of bank revolving loans available to it
under its Canadian bank facility. Bank revolving loans may be used by the
Company for working capital needs, acquisitions, common stock repurchases and
other permitted purposes. Bank revolving loans may be borrowed, repaid and
reborrowed until December 31, 2003, their final maturity date under both
facilities.
At March 31, 2000, bank revolving loans consisted of $110.8 million related
primarily to seasonal working capital needs and $125.2 million related to
long-term financing of acquisitions. At March 31, 2000, amounts expected to be
repaid within one year consisted of $110.8 million of bank revolving loans and
$39.4 million of bank term loans. Bank revolving loans not expected to be repaid
within one year have been recorded as long-term debt.
6. Income Taxes
The provision for income taxes for each of the three month periods ended March
31, 2000 and 1999 was recorded at an effective tax rate of 39.0%.
7. Deficiency in Stockholders' Equity
The Company's Board of Directors has authorized the repurchase by the Company of
up to $70.0 million of its common stock. The Company expects to fund repurchases
from internally generated funds or from revolving loan borrowings under its U.S.
Credit Agreement. The Company's repurchases of common stock are recorded as
treasury stock and result in an increase in deficiency in stockholders' equity.
Through March 31, 2000, the Company had repurchased 2,608,975 shares of its
common stock for $59.9 million.
8. Business Segment Information
Presented below is a table setting forth reportable business segment profit
(loss) for the three months ended March 31, 2000 and 1999 for the Company's
three business segments.
-10-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2000 and 1999 and for the
three months then ended is unaudited)
8. Business Segment Information (continued)
Metal Food Plastic Specialty
Containers Containers Packaging Other(1) Total
---------- ---------- --------- ----- -----
(Dollars in millions)
Three Months Ended
March 31, 2000
- ------------------
Net sales ............................................. $295.5 $84.6 $30.6 $ -- $410.7
EBITDA(2) ............................................. 34.6 15.4 2.8 (1.4) 51.4
Depreciation and amortization(3) ...................... 13.0 6.2 2.5 -- 21.7
Segment profit (loss) ................................. 21.6 9.2 0.3 (1.4) 29.7
Three Months Ended
March 31,1999
- ------------------
Net sales ............................................. $288.3 $78.8 $31.6 $ -- $398.7
EBITDA(2) ............................................. 31.9 15.8 4.1 (0.7) 51.1
Depreciation and amortization(3) ...................... 13.1 5.7 2.2 -- 21.0
Segment profit (loss) ................................. 18.8 10.1 1.9 (0.7) 30.1
(1)The other category provides information pertaining to the corporate
holding company and includes $0.7 million for the three months ended
March 31, 2000 related to start-up costs for the e-commerce packaging
venture described below in Note 9.
(2)EBITDA means earnings before interest, taxes, depreciation and
amortization.
(3)Depreciation and amortization excludes debt cost amortization of $0.4
million for each of the three months ended March 31, 2000 and 1999.
Total segment profit is reconciled to income before income taxes as follows:
March 31, March 31,
2000 1999
---- ----
(Dollars in millions)
Total segment profit ..................................... $29.7 $30.1
Interest expense and other related financing costs ....... 21.0 20.9
----- -----
Income before income taxes ............................ $ 8.7 $ 9.2
===== =====
-11-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2000 and 1999 and for the
three months then ended is unaudited)
9. Subsequent Event
On April 5, 2000, the Company announced that it will be investing up to $20.0
million for a minority interest in a neutral, independent e-commerce joint
venture, Packtion, with Morgan Stanley Dean Witter Private Equity and Diamond
Technology Partners. The Company's investment is subject to completion of
appropriate documentation. The new company, which has $53.0 million in initial
funding commitments, plans to provide a comprehensive online marketplace for
packaging goods and services by combining content, collaboration and procurement
capabilities which will streamline the product development process and enhance
transaction opportunities for buyers and sellers of packaging.
During the quarter ended March 31, 2000, the Company incurred start-up costs
aggregating $0.7 million relating to the venture which were included in selling,
general and administrative expenses.
-12-
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Statements included in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this Quarterly Report on
Form 10-Q which are not historical facts are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and Securities Exchange Act of 1934. Such forward-looking
statements are made based upon management's expectations and beliefs concerning
future events impacting the Company and therefore involve a number of
uncertainties and risks, including, but not limited to, those described in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999
and the Company's other filings with the Securities and Exchange Commission. As
a result, the actual results of operations or financial condition of the Company
could differ materially from those expressed or implied in such forward-looking
statements.
RESULTS OF OPERATIONS
Summary unaudited results of operations for the Company's three business
segments, metal food containers, plastic containers and specialty packaging, for
the three months ended March 31, 2000 and 1999 are provided below.
Three Months Ended March 31,
----------------------------
2000 1999
---- ----
(In millions)
Net sales:
Metal food containers ................... $295.5 $288.3
Plastic containers ...................... 84.6 78.8
Specialty packaging ..................... 30.6 31.6
------ ------
Consolidated ......................... $410.7 $398.7
====== ======
Operating profit:
Metal food containers ................... $ 21.6 $ 18.8
Plastic containers ...................... 9.2 10.1
Specialty packaging ..................... 0.3 1.9
Other (1) ............................... (1.4) (0.7)
------ ------
Consolidated ......................... $ 29.7 $ 30.1
====== ======
- -------------
(1) Includes $0.7 million for the three months ended March 31, 2000
related to start-up costs for Packtion, an e-commerce packaging
venture.
-13-
Three Months Ended March 31, 2000 Compared with Three Months Ended
March 31, 1999
Net Sales. Consolidated net sales increased $12.0 million, or 3.0%, to $410.7
million for the three months ended March 31, 2000, as compared to net sales of
$398.7 million for the same three months in the prior year. This increase
resulted from higher net sales of the metal food and plastic container
businesses.
Net sales for the metal food container business were $295.5 million for the
three months ended March 31, 2000, an increase of $7.2 million, or 2.5%, from
net sales of $288.3 million for the same period in 1999. This increase was
primarily attributable to higher unit sales.
Net sales for the plastic container business of $84.6 million during the three
months ended March 31, 2000 increased $5.8 million, or 7.4%, from net sales of
$78.8 million for the same period in 1999. The increase in net sales was
principally attributable to higher average sales prices due to the pass through
of higher resin costs as well as to a favorable mix of sales.
Net sales for the specialty packaging business decreased $1.0 million, or 3.2%,
to $30.6 million during the three months ended March 31, 2000, as compared to
$31.6 million for the same period in 1999. This decrease was primarily
attributable to a change in the mix of products sold.
Cost of Goods Sold. Cost of goods sold as a percentage of consolidated net sales
was 88.1% ($361.9 million) for the three months ended March 31, 2000, an
increase of 0.1 percentage points as compared to 88.0% ($350.9 million) for the
same period in 1999. The slight decline in gross profit margins was primarily
attributable to higher resin costs of the plastic container business and lower
sales of the specialty packaging business and was mostly offset by higher unit
sales of the metal food container business.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.3 million to $19.1 million for the three
months ended March 31, 2000, as compared to $17.8 million for the same period in
1999. This increase includes $0.7 million related to start-up costs for
Packtion, an e-commerce packaging venture. Excluding such start-up costs,
selling, general and administrative expenses as a percentage of consolidated net
sales for the three months ended March 31, 2000 remained constant at 4.4% as
compared to the same period in the prior year.
-14-
Income from Operations. Before start-up costs relating to the e-commerce
packaging venture, operating income for the first quarter of 2000 increased $0.3
million to $30.4 million, as compared to $30.1 million in the same period in
1999. This increase was a result of the improved operating performance of the
metal food container business. Income from operations (before such start-up
costs) as a percentage of consolidated net sales for the three months ended
March 31, 2000 declined 0.2 percentage points to 7.4%, as compared to 7.6% for
the same period in 1999. This decline was a result of lower operating margins of
the plastic container and specialty packaging businesses and was offset, in
part, by the improved operating performance of the metal food container
business. After start-up costs of $0.7 million relating to the e-commerce
packaging venture, operating income for the first quarter of 2000 was $29.7
million or 7.2% of consolidated net sales.
Income from operations as a percentage of net sales for the metal food container
business increased 0.7 percentage points to 7.3% ($21.6 million) for the three
months ended March 31, 2000, as compared to 6.6% ($18.8 million) for the same
period in 1999. The increase in income from operations as a percentage of net
sales for the metal food container business was realized as a result of lower
overall per unit manufacturing costs, primarily due to higher volume and cost
savings achieved from previous plant shut downs and more efficient utilization
of plant facilities during the quarter.
Income from operations as a percentage of net sales for the plastic container
business decreased 1.9 percentage points to 10.9% ($9.2 million) for the three
months ended March 31, 2000, as compared to 12.8% ($10.1 million) for the same
period in 1999. The decrease in income from operations as a percentage of net
sales for the plastic container business was primarily a result of the effect of
higher resin costs and higher depreciation expense.
Income from operations as a percentage of net sales for the specialty packaging
business decreased to 0.9% ($0.3 million) for the three months ended March 31,
2000, as compared to 5.9% ($1.9 million) for the same period in 1999. The
decline in operating performance of the specialty packaging business was due to
the effect of lower sales, higher depreciation expense and a change in the mix
of products sold.
Interest Expense. Interest expense increased $0.1 million to $21.0 million for
the three months ended March 31, 2000 as compared to the same period in 1999.
Lower average borrowings outstanding during the quarter due to repayments made
in the prior year offset most of the additional interest incurred as a result of
higher interest rates.
Income Taxes. The provision for income taxes for each of the three month periods
ended March 31, 2000 and 1999 was recorded at an effective tax rate of 39.0%
($3.4 million and $3.6 million, respectively).
-15-
Net Income and Earnings per Share. Before start-up costs related to the
e-commerce packaging venture, net income for the three months ended March 31,
2000 was $5.7 million, an increase of $0.1 million from net income of $5.6
million for the same period in 1999, while earnings per diluted share for the
first quarter of 2000 were $0.31, as compared to $0.30 for the same period in
the prior year. Including after-tax expense of $0.4 million of start-up costs
related to the e-commerce packaging venture, net income for the three months
ended March 31, 2000 was $5.3 million, or $0.29 per diluted share.
CAPITAL RESOURCES AND LIQUIDITY
The Company's liquidity requirements arise primarily from its obligations under
the indebtedness incurred in connection with its acquisitions and the
refinancing of such indebtedness, capital investment in new and existing
equipment and the funding of the Company's seasonal working capital needs.
Historically, the Company has met these liquidity requirements through cash flow
generated from operating activities and revolving loan borrowings.
For the three months ended March 31, 2000, the Company used net borrowings of
revolving loans of $110.8 million under the Company's U.S. Credit Agreement and
proceeds from the exercise of stock options of $0.1 million to fund cash used by
operations of $92.0 million for the Company's seasonal working capital needs and
net capital expenditures of $15.6 million and to increase cash balances by $3.3
million.
Because the Company sells metal containers used in fruit and vegetable pack
processing, its sales are seasonal. As is common in the industry, the Company
must access working capital to build inventory and then carry accounts
receivable for some customers beyond the end of the summer and fall packing
season. Seasonal accounts are generally settled by year end. Due to the
Company's seasonal requirements, the Company expects to incur short-term
indebtedness to finance its working capital requirements.
The Company utilizes its revolving loan facilities for seasonal working capital
needs and for other general corporate purposes, including acquisitions and
repurchases of its common stock. For 2000, the Company estimates that at its
peak it will utilize approximately $220 - $230 million of its revolving loan
facilities for seasonal working capital needs. Amounts available under the
Company's revolving loan facilities in excess of its seasonal working capital
needs are available to the Company to pursue its growth strategy and for other
permitted purposes.
As of March 31, 2000, the Company had $236.0 million of revolving loans
outstanding, of which $110.8 million related primarily to seasonal working
capital needs and $125.2 million related to long-term financing of acquisitions.
Revolving loans not expected to be repaid within one year have been recorded as
long-term debt. The unused portion of revolving loan commitments under the
Company's credit agreements at March 31, 2000, after taking into account
outstanding letters of credit, was $297.8 million.
-16-
Pursuant to the indenture relating to the Company's 13-1/4% Subordinated
Debentures (the "13-1/4% Debentures"), the Company is permitted to redeem all or
any of the 13-1/4% Debentures beginning July 15, 2000. The Company is
considering redeeming in the third quarter of 2000 all of its outstanding
13-1/4% Debentures ($56.2 million principal amount) at a redemption price of
109.938% of their principal amount in accordance with their terms, using lower
cost revolving loans from its U.S. Credit Agreement to fund this redemption.
The Company's Board of Directors has authorized the repurchase of up to $70
million of its common stock. As of March 31, 2000, the Company had repurchased
2,608,975 shares of its common stock for an aggregate cost of approximately
$59.9 million. The Company intends to finance future share repurchases, if any,
through revolving loan borrowings under its U.S. Credit Agreement or through
internally generated funds.
Management believes that cash generated by operations and funds from revolving
loan borrowings under the Company's credit agreements will be sufficient to meet
the Company's expected operating needs, planned capital expenditures, debt
service, rationalization costs, share repurchase plan, and tax obligations for
the foreseeable future.
The Company is continually evaluating and pursuing acquisition opportunities in
the consumer goods packaging market. The Company intends to borrow additional
revolving loans under its U.S. Credit Agreement to finance any such acquisitions
and to fund any resulting increased operating needs. However, the Company may
need to incur additional new indebtedness to finance any such acquisitions and
to fund any resulting increased operating needs. Any new financing will have to
be effected in compliance with the agreements governing the Company's
indebtedness. There can be no assurance that the Company will be able to
complete any such acquisition or obtain any such new financing.
The Company is in compliance with all financial and operating covenants
contained in the instruments and agreements governing its indebtedness and
believes that it will continue to be in compliance with all such covenants
during 2000.
-17-
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
---------------------------------------------------------
Market risks relating to the Company's operations result primarily from changes
in interest rates. The Company also has limited foreign currency risk associated
with its Canadian operations. The Company employs established policies and
procedures to manage its exposure to fluctuations in interest rates and the
value of foreign currencies. Interest rate and foreign currency transactions are
used only to the extent considered necessary to meet the Company's objectives.
The Company does not utilize derivative financial instruments for trading or
other speculative purposes.
Information regarding the Company's interest rate risk and foreign currency
exchange rate risk has been disclosed in its Annual Report on Form 10-K for the
fiscal year ended December 31, 1999. There has not been a material change to the
Company's interest rate risk or foreign currency exchange rate risk since such
filing.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
-------------- -----------
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
-18-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned thereunto duly authorized.
SILGAN HOLDINGS INC.
Dated: May 9, 2000 /s/Harley Rankin, Jr.
- ------------------ --------------------------------------
Harley Rankin, Jr.
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
Dated: May 9, 2000 /s/Stephen J. Sweeney
- ------------------- ----------------------------------
Stephen J. Sweeney
Vice President and Controller
(Chief Accounting Officer)
-19-
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
----------- -------
12 Ratio of Earnings to Fixed Charges
for the three months ended March 31,
2000 and 1999
27 Financial Data Schedule for the three
months ended March 31, 2000, submitted
to the Securities and Exchange
Commission in electronic format
Exhibit 12
SILGAN HOLDINGS INC.
RATIO OF EARNINGS TO FIXED CHARGES
Three Months Ended
------------------
March 31, March 31,
2000 1999
---- ----
(Unaudited)
(Dollars in thousands)
Income before income taxes ............................ $ 8,674 $ 9,211
Add:
Interest expense and debt amortization ....... 20,981 20,893
Rental expense representative of interest
factor ...................................... 289 255
------- -------
Net income, as adjusted ...................... $29,944 $30,359
======= =======
Fixed charges:
Interest expense and debt amortization ....... $20,981 $20,893
Rental expense representative of interest
factor .................................... 289 255
------- -------
Total fixed charges .......................... $21,270 $21,148
======= =======
Ratio of earnings to fixed charges .................... 1.41 1.44
======= =======