SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 1, 1995
SILGAN HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 33-28409 06-1269834
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
4 Landmark Square, Stamford, Connecticut 06901
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 975-7110
1
The undersigned registrant hereby amends the following items of its
Current Report on Form 8-K filed August 14, 1995, as set forth in the pages
attached hereto:
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) and (b) Financial Statements of Business Acquired and Pro Forma
Financial Information
In accordance with Item 7 of the registrant's Current Report on Form
8-K filed August 14, 1995, the registrant appends to the Form 8-K the
following financial statements and pro forma information:
A. For American National Can Company's Food Metal & Specialty Division:
Financial Statements of Business Acquired
The following report and audited financial statements of American
National Can Company's Food Metal & Specialty Division ("ANC Food
Metal & Specialty Business") are attached hereto as Appendix A:
1. (a) Report of independent public accountants dated September 14,
1995;
(b) Balance Sheets at December 31, 1994 and 1993 prepared in
accordance with SEC Regulation S-X, Rule 3-05;
(c) Statements of Operations for the years ended December 31,
1994, 1993 and 1992, prepared in accordance with SEC
Regulation S-X, Rule 3-05;
(d) Statements of Cash Flows for the years ended December 31,
1994, 1993 and 1992 prepared in accordance with SEC
Regulation S-X, Rule 3-05;
(e) Notes to Financial Statements.
The following unaudited financial statements of ANC Food Metal &
Specialty Business are attached hereto as Appendix B:
2. (a) Unaudited Balance Sheets at June 30, 1995 and 1994 prepared
in accordance with SEC Regulation S-X, Rule 3-05;
(b) Unaudited Statements of Operations for the six months ended
June 30, 1995 and 1994, prepared in accordance with SEC
Regulation S-X, Rule 3-05;
2
(c) Unaudited Statements of Cash Flows for the six months ended
June 30, 1995 and 1994 prepared in accordance with SEC
Regulation S-X, Rule 3-05;
(d) Notes to unaudited Financial Statements.
B. For Silgan Holdings Inc.:
Pro Forma Financial Information
The following unaudited pro forma financial information of Silgan
Holdings Inc. are attached hereto as Appendix C:
1. (a) Unaudited pro forma balance sheet at June 30, 1995 prepared
in accordance with SEC Regulation S-X, Article 11;
(b) Unaudited pro forma statements of operations for the year
ended December 31, 1994 and for the six months ended June
30, 1995 prepared in accordance with SEC Regulation S-X,
Article 11.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by
the undersigned, thereunto duly authorized.
SILGAN HOLDINGS INC.
Date: October 16, 1995 /s/Harley Rankin, Jr.
Harley Rankin, Jr.
Executive Vice President,
Chief Financial Officer
and Treasurer
(Principal Financial Officer)
Date: October 16, 1995 /s/Harold J. Rodriguez, Jr.
Harold J. Rodriguez, Jr.
Vice President & Controller
(Chief Accounting Officer)
3
APPENDIX A
REPORT OF INDEPENDENT ACCOUNTANTS
September 14, 1995
To the Board of Directors of
American National Can Company
In our opinion, the accompanying balance sheets and the related statements
of operations and of cash flows present fairly, in all material respects,
the financial position of the Food Metal & Specialty Division (the
"Division"), a division of American National Can Company, at December 31,
1994 and 1993, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 2 to the financial statements, the Division changed
its method of accounting for postemployment benefits in 1994 and
postretirement benefits in 1993. Also, as discussed in Note 2 to the
financial statements, the Division changed its method of evaluating the
recoverability of goodwill in 1994.
Price Waterhouse LLP
Chicago, Illinois
4
FOOD METAL & SPECIALTY DIVISION
BALANCE SHEETS
(Dollars in thousands)
December 31,
1994 1993
ASSETS
CURRENT ASSETS:
Cash $ 7 $ 8
Accounts receivable, less allowances of
$732 in 1994 and $92 in 1993 (Note 3) 45,578 38,597
Inventories (Notes 2 and 4) 120,963 96,713
Deferred income taxes (Notes 2 and 7) 19,287 26,400
Other 7,747 1,123
TOTAL CURRENT ASSETS 193,582 162,841
PROPERTY, PLANT AND EQUIPMENT, net
(Notes 2 and 5) 208,157 247,137
GOODWILL, less accumulated amortization
of $56,704 in 1994 and $25,045 in 1993
(Notes 1 and 2) 146,363 178,022
OTHER ASSETS 2,140 7,624
TOTAL ASSETS $550,242 $595,624
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable $ 93,058 $ 82,040
Accrued liabilities (Notes 9 and 13) 55,819 79,333
Long-term obligations under capital leases
to be paid within one year (Note 6) 50 87
TOTAL CURRENT LIABILITIES 148,927 161,460
LONG-TERM LIABILITIES:
Long-term obligations under capital
leases (Note 6) 1,113 1,163
Deferred income taxes (Notes 2 and 7) 19,684 29,897
Other (Notes 12 and 13) 61,026 73,052
TOTAL LONG-TERM LIABILITIES 81,823 104,112
COMMITMENTS AND CONTINGENCIES (Note 15) - -
EQUITY:
Equity adjustment for minimum pension
liability (Note 10) ( 500) ( 246)
Investments by and advances from ANC
(Note 3) 319,992 330,298
TOTAL EQUITY 319,492 330,052
TOTAL LIABILITIES AND EQUITY $550,242 $595,624
See accompanying notes to financial statements.
5
FOOD METAL & SPECIALTY DIVISION
STATEMENTS OF OPERATIONS
(Dollars in thousands)
Year Ended December 31,
1994 1993 1992
NET SALES (Note 16) $596,594 $578,081 $698,699
OPERATING COSTS AND EXPENSES:
Cost of goods sold (excluding
depreciation and amortization) 516,286 508,434 630,764
Depreciation and amortization of
property, plant and equipment
(Note 2) 17,073 23,692 27,965
Selling, general and administrative
expenses (Note 3) 26,446 31,304 39,826
Research and development expenses 5,594 4,779 8,302
Net postretirement benefit expense
(Note 11) 37,030 37,356 16,312
Restructuring expenses (Note 13) 10,100 4,588
Amortization of goodwill (Note 2) 31,659 5,009 5,009
Financial expense, net (Notes 3 and 8) 2,255 2,565 9,883
Other, net (Note 14) 7,112 3,827 786
653,555 616,966 743,435
LOSS BEFORE TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES ( 56,961) ( 38,885) ( 44,736)
BENEFIT (PROVISION) FOR INCOME TAXES
(Notes 2 and 7):
Current 7,448 40,646 19,980
Deferred 2,356 ( 27,507) ( 4,565)
9,804 13,139 15,415
LOSS BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES ( 47,157) ( 25,746) ( 29,321)
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES, net of tax
(Note 2) ( 914) ( 139,983) -
NET LOSS ($ 48,071) ($165,729) ($29,321)
See accompanying notes to financial statements.
6
FOOD METAL & SPECIALTY DIVISION
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Year Ended December 31,
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($48,071) ($165,729) ($29,321)
Adjustments to reconcile net loss
to net cash provided from (used
in) operating activities:
Cumulative effect of changes in
accounting principles 914 139,983
Depreciation and amortization 48,732 28,701 32,974
Provision for restructuring 10,100 4,588
Provision for asset writedowns 7,110
Provision (benefit) for deferred
income taxes ( 2,356) 27,507 4,565
Other adjustments to net loss 281 3,907 1,250
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable ( 7,273) 14,572 ( 227)
(Increase) decrease in
inventories ( 24,891) 19,817 33,762
(Increase) decrease in other
current assets ( 6,624) 173 319
Decrease in other assets 6,989 448 4,804
Decrease in accounts payable
and other liabilities ( 35,595) ( 33,779) ( 50,350)
NET CASH PROVIDED FROM (USED IN)
OPERATING ACTIVITIES ( 50,684) 35,600 2,364
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ( 10,153) ( 17,723) ( 9,594)
Proceeds from sale of property, plant
and equipment 10,557 2,921 25,659
Transfer of property, plant and
equipment to (from) other ANC
business units 12,601 715 ( 223)
NET CASH PROVIDED FROM (USED IN)
INVESTING ACTIVITIES 13,005 ( 14,087) 15,842
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of obligations under capital
leases ( 87) ( 116) ( 147)
Increase (decrease) in advances from
ANC (Note 3) 37,765 ( 21,398) ( 18,534)
NET CASH PROVIDED FROM (USED IN)
FINANCING ACTIVITIES 37,678 ( 21,514) ( 18,681)
NET DECREASE IN CASH ( 1) ( 1) ( 475)
CASH, beginning of year 8 9 484
CASH, end of year $ 7 $ 8 $ 9
See accompanying notes to financial statements.
7
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Note 1 - Organization and Basis of Presentation
Food Metal & Specialty Division (the "Division") is a division of American
National Can Company ("ANC") which is an indirect, majority-owned
subsidiary of Pechiney Corporation, a Delaware corporation. Pechiney
Corporation is a wholly-owned subsidiary of Pechiney International S.A.,
which is a majority-owned subsidiary of Pechiney S.A., a French
corporation.
ANC, including the operations of the Division, was acquired by Pechiney
Corporation on December 31, 1988. As a result of the acquisition, the
tangible assets and liabilities of the Division were adjusted to their fair
values as of the date of acquisition and an allocated portion of the
purchase price and related expenses incurred by Pechiney Corporation to
acquire ANC, together with the resultant goodwill related to the Division
and amortization thereof, have been pushed down to the Division's financial
statements.
The accompanying financial statements reflect the "carve-out" financial
position, results of operations and cash flows of the Division for the
periods presented. The financial information included herein does not
necessarily reflect what the financial position and results of operations
of the Division would have been had it operated as a stand alone entity
during the periods covered, and may not be indicative of future operations
or financial position.
Note 2 - Summary of Significant Accounting Policies
Revenue Recognition
Revenues are recognized when goods are shipped.
Financial Instruments
The carrying value of the Division's financial instruments, primarily
receivables and payables, generally approximates fair value.
Inventories
Inventories are stated at the lower of cost or market. The costs of
inventories other than spare parts were determined by the first-in, first-
out (FIFO) method. Costs of spare parts inventories were determined by the
weighted average method.
8
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Property, Plant and Equipment
During 1994, the Division performed a study of the economic lives of its
fixed assets and determined that the useful lives of certain asset
categories were generally longer than the lives used for depreciation
purposes. Therefore, the Division extended the estimated depreciable lives
of certain categories of property, plant and equipment (mainly machinery
and equipment used in the production process), by a maximum of two years,
effective January 1, 1994. The effect of this change in estimate reduced
1994 depreciation expense and net loss by $3,203 and $1,957, respectively.
Goodwill
Goodwill consists of an allocated portion of the Pechiney Corporation
acquisition costs in excess of the fair value of the net assets of the
Division (see Note 1). Goodwill is amortized on a straight-line method
over forty years.
In addition to the normal charge for the year, Pechiney Corporation and
ANC, in 1994, revised their method of evaluating goodwill resulting in a
writedown of $26,650 relating to the Division. A review of the carrying
value of goodwill in the light of recent profitability trends of certain
assets and current market values resulted in this additional charge.
Other Postretirement and Postemployment Benefits
Effective January 1, 1993, the Division adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions" ("SFAS 106") which requires that the
projected cost of all health care and other nonpension benefits provided by
the Division to its retired employees and their dependents be accrued
during an employee's period of service rather than expensed as paid. The
cumulative effect of this change in accounting for postretirement benefits
resulted in a non-cash, after-tax charge in 1993 of $139,983 (net of
$89,122 of income tax benefits). This cumulative effect represents the
actuarial present value of all future medical and life insurance benefits
to be paid to active employees and employees who retired subsequent to the
date of the acquisition by Pechiney Corporation (see Note 1) based on
services rendered to date. The amount of the cumulative effect recorded by
the Division at January 1, 1993 was determined (a) for active employees on
the basis of an actuarial valuation and (b) for retired employees by
applying the pro rata allocation relationship for determining
postretirement benefit expense for retired employees as described in Note
11, to the total accumulated postretirement benefit obligation for retired
employees of ANC after reduction for the remaining portion of the liability
9
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
established at the date of acquisition by Pechiney Corporation for
employees who had retired at that date. Additional expense for 1993 due to
the adoption of SFAS 106 exclusive of the cumulative effect was $20,873.
Prior to 1993, the Division accounted for health care and other non-pension
benefits for retired employees on the cash basis except for benefits of
employees who were retired as of the date of the acquisition by Pechiney
Corporation (see Note 11).
Effective January 1, 1994, the Division adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("SFAS 112"). This standard requires that the projected costs of
all benefits the Division provides to former or inactive employees (and
their covered dependents) before their retirement be accrued at the time
they are terminated or become inactive. The cumulative effect of this
change in accounting for postemployment benefits resulted in a non-cash,
after-tax charge in 1994 of $914 (net of $582 of income tax benefits).
There was no impact on pre-tax earnings in 1994 as a result of complying
with SFAS 112.
Income Taxes
The Division is included as part of ANC in the consolidated U.S. federal
income tax return of Pechiney Corporation. The provision for income taxes
is computed on the taxable income or loss of the Division on a stand-alone
basis. For financial reporting purposes, income tax benefits are
recognized based upon amounts currently recognized by ANC which credits the
Division for the tax benefits resulting from the inclusion of the
Division's losses in the consolidated return.
The Division accounts for income taxes based on the asset and liability
approach in accordance with Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes". The asset and liability approach
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the
financial reporting and the tax bases of assets and liabilities.
The liability for the current portion of the tax provision is transferred
to the Investments by and advances from ANC account at the end of each
year. The deferred income tax assets and liabilities have been included in
the accompanying balance sheets.
10
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Note 3 - Related Party Transactions
ANC provides the Division certain data processing, human resources,
purchasing, credit, accounting and tax services. An allocation of the
estimated costs of these services is charged directly to the Division each
month by ANC using varying allocation bases (primarily number of
transactions processed). The allocation process is consistent with the
methodology used by ANC to allocate costs of similar services provided to
its other business units. The costs for these services are negotiated and
agreed to by both the Division and ANC each year, and in the opinion of
management are reasonable. The allocated costs of these services, which
aggregated $7,110 in 1994, $9,241 in 1993 and $16,153 in 1992, were
reflected in selling, general and administrative expenses in the
accompanying statements of operations.
ANC maintains a centralized cash management system and substantially all
cash receipts and disbursements are recorded at the corporate level. The
Division is charged or credited for the net of cash receipts and
disbursements each month.
The Division incurs a monthly charge for interest expense from ANC based on
a formula which takes into consideration its percentage of certain assets
and liabilities in relation to the total for ANC of these assets and
liabilities (see Note 8).
The following table sets forth the activity in the Investments by and
advances from ANC account for the years ended December 31, 1994, 1993 and
1992:
1994 1993 1992
Balance, beginning of year $330,298 $377,442 $425,297
Net loss ( 48,071)( 165,729)( 29,321)
Charges/advances from ANC, net,
including in 1993, $139,983 relating
to a cumulative effect of a change
in accounting principle 37,765 118,585 ( 18,534)
Balance, end of year $319,992 $330,298 $377,442
11
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
ANC maintains agreements with certain banks to sell trade accounts
receivable, with limited recourse, on a revolving basis. The agreements
specify certain eligibility criteria for receivables that are sold,
including credit quality and maturity. At December 31, 1994 and 1993, a
portion of the Division's receivables were included in the eligible pool of
receivables sold by ANC. The balance sheets reflect all Division
receivables, including those in the eligible pool.
Note 4 - Inventories
Inventories at December 31, 1994 and 1993 consist of the following:
1994 1993
Raw materials $ 43,466 $13,968
Work-in-process 6,143 6,147
Finished goods 60,515 64,952
Machine spare parts 10,839 11,646
$120,963 $96,713
Note 5 - Property, Plant and Equipment
Property, plant and equipment at December 31, 1994 and 1993 consists of the
following:
Estimated
1994 1993 Useful Life
Land $ 25,680 $ 31,260 -
Buildings and improvements 59,876 60,912 40 years
Machinery and equipment 229,333 256,286 3 to 20 years
Less: Accumulated
depreciation ( 106,732)( 101,321)
$208,157 $247,137
Property, plant and equipment includes assets held for sale with a net book
value of $39,439 and $35,539 at December 31, 1994 and 1993, respectively.
At December 31, 1994 and 1993, the Division has available restructuring
reserves of $12,423 and $7,829, respectively, to cover the estimated losses
to be incurred on the disposal of these assets (see Note 13).
12
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Note 6 - Leases
The Division leases manufacturing, warehouse and office facilities and
certain equipment. Future minimum lease payments required under capital
leases and operating leases having initial or remaining noncancelable lease
terms in excess of one year are set forth below. Such future minimum lease
payments have not been reduced by sublease rentals to be received
subsequent to December 31, 1994 of $4,385 for operating leases:
Capital Operating
Leases Leases
1995 $ 154 $ 4,116
1996 154 3,603
1997 154 3,366
1998 154 2,769
1999 153 2,226
Thereafter 1,529 5,736
Total minimum rentals 2,298 $21,816
Less amount representing interest ( 1,135)
Present value of future minimum
payments 1,163
Less current portion ( 50)
Long-term obligations under
capital leases $1,113
Rental expense under operating leases for the years ended December 31,
1994, 1993 and 1992 was as follows:
1994 1993 1992
Gross rental expense $5,568 $6,418 $4,597
Less sublease rental income 652 865 419
$4,916 $5,553 $4,178
13
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Note 7 - Income Taxes
The income tax benefit (provision) for the years ended December 31, 1994,
1993 and 1992 was as follows:
1994 1993 1992
Current income taxes:
Federal $ 6,299 $34,376 $16,898
State 1,149 6,270 3,082
7,448 40,646 19,980
Deferred income taxes 2,356 ( 27,507) ( 4,565)
$ 9,804 $13,139 $15,415
The provision for taxes on income differed from the U.S. statutory rate for
the years ended December 31, 1994, 1993 and 1992 for the following reasons:
1994 1993 1992
Statutory tax rate 35.0% 35.0% 35.0%
State and local taxes, net
of federal benefit 1.7 3.3 3.4
Goodwill amortization (19.5) ( 4.5) ( 3.9)
17.2% 33.8% 34.5%
Deferred tax assets (liabilities) were comprised of the following at
December 31, 1994 and 1993:
1994 1993
Deductible temporary differences:
Restructuring reserve $20,043 $32,034
Environmental reserve 9,229 9,393
Employee benefits 6,191 7,589
Workers' compensation 5,031 4,533
Inventories 3,122 2,750
Other 1,073 1,370
Total 44,689 57,669
Taxable temporary differences:
Property, plant and equipment ( 45,086) ( 61,166)
Net deferred tax liability ($ 397) ($ 3,497)
14
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Note 8 - Financial Expenses, net
Financial expenses for the years ended December 31, 1994, 1993 and 1992
consist of the following:
1994 1993 1992
Interest expense:
Allocated from ANC
(Note 3) $ 2,986 $ 3,099 $10,698
Interest imputed on
obligations under
capital leases 75 123 135
Capitalized interest ( 582) ( 211) ( 732)
Total interest expense 2,479 3,011 10,101
Interest income ( 224) ( 446) ( 218)
Financial expenses, net $ 2,255 $ 2,565 $ 9,883
Note 9 - Accrued Liabilities
The components of accrued liabilities at December 31, 1994 and 1993 were as
follows:
1994 1993
Restructuring reserve (Note 13) $20,000 $37,000
Accrued payroll and employee benefits 18,219 22,278
Workers' compensation liability 12,932 11,652
Accrued taxes other than payroll 2,155 2,926
Payable to fixed asset vendors 1,903 2,692
Accrued quality claims - 1,900
Pension liabilities (Note 10) 542 668
Other 68 217
$55,819 $79,333
Note 10 - Pension Liabilities
The Division sponsors defined benefit retirement plans covering certain
hourly employees of the Division. The Division's remaining hourly
employees are included in ANC-sponsored defined benefit plans or multi-
employer union plans. The Division's salaried employees are included in
defined benefit and defined contribution plans which cover substantially
all of the salaried employees of ANC. The ANC-sponsored plans for salaried
15
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
employees provide benefits that are based on employees' years of service
and compensation during employment with the Division. The Division through
ANC makes contributions to the defined benefit plans at least equal to the
minimum funding requirements under the Employee Retirement Income Security
Act of 1974 (ERISA).
Net periodic cost (income) for defined benefit and defined contribution
plans for the years ended December 31, 1994, 1993 and 1992 was as follows:
1994 1993 1992
Division-sponsored hourly
plans ($ 340) $ 184 $ 370
ANC-sponsored plans:
Active hourly employees 4,558 7,279 8,222
Active salaried employees 2,865 3,267 2,894
Retired hourly employees 2,075 7,635 7,191
Retired salaried employees ( 995) ( 419) ( 542)
Multi-employer union plans 148 169 200
$ 8,311 $18,115 $18,335
Net periodic pension cost (income) for the Division-sponsored hourly plans
for 1994, 1993 and 1992 included the following components:
1994 1993 1992
Service cost - benefits
earned during the period $ 286 $ 350 $ 429
Interest cost on projected
benefit obligation 722 835 886
Actual return on assets -
loss (gain) 272 ( 1,795) ( 544)
Net amortization and deferral ( 1,620) 794 ( 401)
Net periodic pension cost
(income) ($ 340) $ 184 $ 370
Pension expense for active employees of the Division participating in the
ANC-sponsored plans was allocated based on an actuarial valuation. Pension
expense (income) for the Division's retirees participating in ANC-sponsored
plans was based on a pro-rata allocation of active Division participants to
total actives in each ANC-sponsored plan.
16
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
For the years 1992 through 1994, the discount rate used to determine the
actuarial present value of the projected benefit obligation was 8.0%, the
expected rate of return on plan assets was 10.0%, and the discount rate
used to determine the interest cost on the projected benefit obligation was
8.0%. The expected increase in future salaries for those plans using
future compensation assumptions ranged from 4.0% to 6.9% for 1994 and 6.0%
to 8.9% for 1993 and 1992.
All amortization is based upon the average remaining service period of
covered employees except for unrecognized prior service costs for benefit
improvements negotiated during the current period which are amortized over
six or ten years (twice the contract period).
The following table sets forth the funded status and amounts recognized for
the Division-sponsored hourly plans in the balance sheets at December 31,
1994 and 1993:
1 9 9 4 1 9 9 3
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
Actuarial present value of
benefit obligations:
Vested benefits $ 4,985 $ 3,434 $ 5,449 $ 2,576
Nonvested benefits 818 - 927 -
Accumulated benefit obligation 5,803 3,434 6,376 2,576
Excess of projected benefit
obligation over accumulated
benefit obligation 427 - 2,324 -
Projected benefit obligation 6,230 3,434 8,700 2,576
Plan assets at fair value 8,724 2,369 10,118 1,674
Funded status 2,494 ( 1,065) 1,418 ( 902)
Unrecognized prior service cost 3 - 5 -
Unrecognized net (gain) loss ( 1,319) 708 ( 643) 189
Additional minimum liability - ( 818) - ( 403)
Accrued pension asset
(liability)recognized in
the balance sheets $ 1,178 ($ 1,175) $ 780 ($ 1,116)
17
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
The plans' assets are held by several master trusts created for collective
investment of plans' funds. At December 31, 1994 and 1993, assets held by
the master trusts consisted primarily of common and preferred stocks,
corporate bonds, U.S. government obligations, pooled funds, real estate and
short-term investments.
At December 31, 1994 and 1993, equity adjustments of $500 and $246,
respectively, (net of taxes of $318 and $157, respectively) had been
recorded, representing the excess of the additional minimum pension
liability over the related unrecognized prior service cost for the
Division-sponsored plans.
The projected benefit obligation for the Division's active hourly and
salaried employees included in the ANC-sponsored defined benefit plans,
based on actuarial valuations, was approximately $102,000 at December 31,
1994 and $130,000 at December 31, 1993. Such obligations are not included
in the accompanying balance sheets.
Note 11 - Postretirement Benefits Other than Pensions
ANC sponsors health care and life insurance benefit plans for substantially
all of the Division's hourly and salaried employees and their dependents.
Certain of the plans require retiree contributions. The Division also
participates in several multi-employer union plans which provide
postretirement health care benefits to certain hourly employees.
The net postretirement benefit expense for active employees is based on an
actuarial valuation. For purposes of these financial statements, the net
postretirement benefit expense for retired employees of the Division
participating in the ANC-sponsored plans was computed based on a pro-rata
allocation of the number of Division employees that retired between 1989
and 1994 compared to the total number of employees covered by the plans who
retired during the same time period. This allocation method assumes that
the percentage of Division employees who retired prior to 1989, compared to
all employees who retired prior to 1989, approximates the percentage
calculated above. Management believes that this method of allocation is
reasonable. Total postretirement benefit expense for retired employees of
ANC participating in the ANC-sponsored plans was determined by actuarial
valuation.
18
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
The net postretirement benefit expense for 1994, 1993 and 1992 included the
following:
1994 1993 1992
In accordance with SFAS 106:
Allocated portion of service and interest
cost for the Division's active employees
participating in ANC-sponsored plans:
Active hourly employees $ 2,885 $ 2,642
Active salaried employees 990 895
Allocated portion of interest cost for the
Division's retired employees participating
in ANC-sponsored plans:
Retired hourly employees 28,034 28,553
Retired salaried employees 4,830 5,026
36,739 37,116
Prior to adoption of SFAS 106:
Payments for employees retired subsequent
to the acquisition by Pechiney Corporation $15,956
Division contributions to hourly
multi-employer union plans 291 240 356
Net postretirement benefit expense $37,030 $37,356 $16,312
These benefits are funded from current Division cash flows as claims are
paid.
The postretirement benefit obligation for active employees of the Division
included in ANC-sponsored plans, which was approximately $28,000 and
$25,500 for hourly employees and $8,900 and $8,000 for salaried employees
at December 31, 1994 and 1993, respectively, as determined by actuarial
valuation, is not reflected in the accompanying balance sheets. The
postretirement benefit obligation for retired hourly and salaried employees
of the Division are also not included in the accompanying balance sheets.
A discount rate of 8% was used for determining obligations and interest
costs.
19
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
The following table shows the other assumptions used to develop the
accumulated postretirement benefit obligation and the net post-retirement
benefit expense in 1994 and 1993.
Managed
Under Age Care Under Over Age
65 Age 65 65
Current year health care trend rate 10% 8% 8%
Ultimate trend rate 6% 6% 5%
Year ultimate trend rate is achieved 2001 2001 2001
A one percentage point increase in the assumed health care cost trend rates
would increase the postretirement benefit expense for the Division's active
and retired employees participating in the ANC-sponsored plans by
approximately $2,600 for the year ended December 31, 1994.
Note 12 - Other Long-Term Liabilities
The components of other long-term liabilities at December 31, 1994 and 1993
were as follows:
1994 1993
Restructuring reserve (Note 13) $32,725 $45,351
Environmental reserve (Note 15) 23,726 24,147
Accrued employee benefits 3,813 2,808
Deferred incentive compensation 762 746
$61,026 $73,052
20
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Note 13 - Restructuring
The Division has implemented a restructuring program to close certain
plants, modify plant operations and consolidate and transfer production
processes between locations. As a result of the restructuring program,
nine plants have been closed or reorganized since 1991 resulting in the
reduction of approximately 1,100 employees through December 31, 1994. The
Division recorded a restructuring provision in June, 1992 of $4,588 which
represented the loss incurred on the sale of property of a closed facility.
In December, 1994, the Division recorded an additional provision of $10,100
for two plants still in the process of being closed or reorganized which
will result in the elimination of approximately 70 additional positions by
the end of 1995.
The following table sets forth the activity in the restructuring reserve
for 1994 and 1993 and the reserve balances at December 31, 1994 and 1993
which are included in accrued liabilities and other long-term liabilities
in the accompanying balance sheets.
Equipment
Standby
and Writedown
Employee Project of Sales
Costs Costs Assets Proceeds Total
Balance at 12/31/92 $87,514 $31,101 $38,264 ($29,685) $127,194
1993 Activity (31,780) (12,313) ( 2,725) 1,975 ( 44,843)
Balance at 12/31/93 55,734 18,788 35,539 ( 27,710) 82,351
1994 Provision 4,310 150 13,550 ( 7,910) 10,100
1994 Activity (31,183) ( 7,497) ( 9,650) 8,604 ( 39,736)
Balance at 12/31/94 $28,861 $11,441 $39,439 ($27,016) $ 52,725
Employee costs primarily include employee separation costs to be incurred
upon plant closures, such as severance and unemployment benefits to be paid
to terminated employees and pension and retiree medical benefits based on
actuarial valuation.
Equipment standby and project costs include costs associated with the
modification of certain facilities, transferring equipment between
locations and the ongoing costs of maintaining certain plants and equipment
from the expected closing date to the estimated sale date.
21
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
As a result of closing certain facilities, the restructuring reserve
includes a provision to record any excess assets at their estimated
realizable values. Anticipated proceeds from the sales of certain
facilities and excess machinery and equipment have been used to offset the
total costs associated with the restructuring program.
Substantially all of these costs will be incurred over the next three
years.
Note 14 - Asset Writedowns
In 1994, the Division recorded a write down of various assets aggregating
$7,110 due to the technological obsolescence of machinery and equipment
used in the production process and machinery and equipment which was
purchased for the manufacture of a new product which was unsuccessful. The
writedown has been included in Other, net in the accompanying statements of
operations.
Note 15 - Contingencies
The Division is involved in litigation and in administrative proceedings
and investigations in various jurisdictions. A number of such matters
involve the Division, ANC and other parties related to environmental
remediation costs.
It is the Division's policy to accrue environmental cleanup costs when it
is probable that a liability has been incurred and an amount is reasonably
estimable. As assessments and cleanups proceed, these liabilities are
reviewed periodically and adjusted as additional information becomes
available. The liabilities can change substantially due to such factors as
additional information on the nature or extent of contamination, methods of
remediation required, and other actions by governmental agencies or private
parties.
At December 31, 1994, the Division has recorded an environmental reserve of
$23,726 which includes $737 for plant locations that are currently in
operation. The remaining reserve of $22,989 includes plant locations which
have been closed and environmental sites that are located somewhere other
than a plant location (landfills, solvent recovery sites, dump sites,
etc.). The majority of these costs are expected to be paid out within the
next 10 years, however, certain costs could be incurred for up to 30 years.
22
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
While the Division's liability, if any, with respect to all pending suits
and claims cannot be determined at this time, it is the opinion of
management that the outcome of any such matters, and all of them combined,
will not have a material adverse effect on the Division's financial
position or results of operations.
Note 16 - Major Customers
The Division had gross sales in excess of 10% to one customer in 1994 and
1993 amounting to approximately $63,900 and $62,000, respectively.
Note 17 - Subsequent Event
On August 1, 1995, Silgan Containers Corporation ("Silgan") acquired from
ANC substantially all of the net operating assets of the Division for cash
of approximately $336,300. The purchase agreement specifies that certain
additional assets will be sold to Silgan upon completion of a restructuring
project at one of the operating plants, but no later than December 31,
1996. Upon completion of this transaction, ANC will no longer actively
sell products in the food metal and specialty markets.
23
APPENDIX B
FOOD METAL & SPECIALTY DIVISION
BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
June 30, 1995 June 30, 1994
ASSETS
CURRENT ASSETS:
Cash $ 6 $ 7
Accounts receivable, less allowances
of $465 in 1995 and $380 in 1994 74,681 73,445
Inventories 160,574 141,836
Deferred income taxes 18,928 23,197
Other 3,331 4,791
TOTAL CURRENT ASSETS 257,520 243,276
PROPERTY, PLANT AND EQUIPMENT, net 191,060 218,770
GOODWILL, less accumulated amortization
of $58,856 in 1995 and $27,550 in 1994 144,211 175,517
OTHER ASSETS 2,145 4,559
TOTAL ASSETS $594,936 $642,122
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable $ 71,223 $ 77,385
Accrued liabilities 46,769 62,689
Long-term obligations under capital leases
to be paid within one year 53 53
TOTAL CURRENT LIABILITIES 118,045 140,127
LONG-TERM LIABILITIES:
Long-term obligations under capital leases 1,086 1,138
Deferred income taxes 17,061 18,773
Other 61,030 73,389
TOTAL LONG-TERM LIABILITIES 79,177 93,300
COMMITMENTS AND CONTINGENCIES - -
EQUITY:
Equity adjustment for minimum pension
liability ( 500) ( 246)
Investments by and advances from ANC 398,214 408,941
TOTAL EQUITY 397,714 408,695
TOTAL LIABILITIES AND EQUITY $594,936 $642,122
See accompanying notes to financial statements.
24
FOOD METAL & SPECIALTY DIVISION
STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
Six Months Ended June 30,
1995 1994
NET SALES $245,052 $256,343
OPERATING COSTS AND EXPENSES:
Cost of goods sold (excluding
depreciation and amortization) 205,307 220,556
Depreciation and amortization of
property, plant and equipment 8,473 10,526
Selling, general and administrative
expenses 13,314 14,331
Research and development expenses 1,979 2,184
Net postretirement benefit expense 17,974 18,484
Amortization of goodwill 2,152 2,505
Financial expense, net 6,258 1,116
Other, net 142 96
255,599 269,798
LOSS BEFORE TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES ( 10,547) ( 13,455)
BENEFIT (PROVISION) FOR INCOME TAXES:
Current 991 ( 3,090)
Deferred 2,265 7,340
3,256 4,250
LOSS BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES ( 7,291) ( 9,205)
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES ( 914)
NET LOSS ($ 7,291) ($ 10,119)
See accompanying notes to financial statements.
25
FOOD METAL & SPECIALTY DIVISION
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($ 7,291) ($ 10,119)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Cumulative effect of changes in
accounting principles 914
Depreciation and amortization 10,625 13,031
Benefit for deferred income taxes ( 2,265) ( 7,304)
Other adjustments to net loss 39 343
Changes in assets and liabilities:
Increase in accounts receivable ( 29,044) ( 32,465)
Increase in inventories ( 39,626) ( 41,076)
Decrease (increase) in other
current assets 5,631 ( 8,130)
Decrease in other assets 268 6,760
Decrease in accounts payable
and other liabilities ( 31,852) ( 22,559)
NET CASH USED IN OPERATING
ACTIVITIES ( 93,515) ( 100,641)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ( 2,993) ( 4,238)
Proceeds from sale of property, plant
and equipment 1,176 9,033
Transfer of property, plant and
equipment to other ANC business units 9,846 9,856
NET CASH PROVIDED FROM INVESTING
ACTIVITIES 8,029 14,651
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of obligations under capital
leases ( 24) ( 59)
Increase in advances from ANC 85,509 86,048
NET CASH PROVIDED FROM FINANCING
ACTIVITIES 85,485 85,989
NET DECREASE IN CASH ( 1) ( 1)
CASH, beginning of year 7 8
CASH, end of year $ 6 $ 7
See accompanying notes to financial statements.
26
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Financial Statements
Results of operations for any interim period are not necessarily indicative
of results of any other periods or for the year. The financial statements
as of June 30, 1995 and 1994 and for the six month periods then ended are
unaudited, but in the opinion of management include all adjustments
necessary for a fair presentation of results for such periods. These
financial statements should be read in conjunction with the audited
financial statements and related notes for the three years ended December
31, 1994.
Note 2 - Inventories
Inventories at June 30, 1995 and 1994 consist of the following:
1995 1994
Raw materials $ 25,180 $ 25,469
Work-in-process 774 813
Finished goods 124,466 104,771
Machine spare parts 10,154 10,783
$160,574 $141,836
Note 3 - Subsequent Event
On August 1, 1995, Silgan Containers Corporation ("Silgan") acquired from
ANC substantially all of the net operating assets of the Division for cash
of approximately $336,300. The purchase agreement specifies that certain
additional assets will be sold to Silgan upon completion of a restructuring
project at one of the operating plants, but no later than December 31,
1996. Upon completion of this transaction, ANC will no longer actively
sell products in the food metal and specialty markets.
27
APPENDIX C
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS AND NARRATIVE DISCLOSURE
(REFLECTING THE ACQUISITION OF AMERICAN NATIONAL CAN COMPANY'S
FOOD METAL & SPECIALTY DIVISION)
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Introductory Note
The following unaudited pro forma consolidated financial statements reflect
the acquisition of the ANC Food Metal & Specialty Business by Silgan
Containers Corporation ("Containers"), an indirect, wholly-owned subsidiary
of Silgan Holdings Inc. ("Silgan" or the "Company"), which occurred on
August 1, 1995. The acquisition will be accounted for using the purchase
method of accounting and the total purchase cost will be allocated first to
the tangible and identifiable intangible assets and liabilities of ANC Food
Metal & Specialty Business acquired and assumed based upon their respective
fair values as determined from preliminary appraisals and valuations, and
the remainder, if any, will be allocated to the excess of cost over fair
value of assets acquired. The aggregate purchase cost and its preliminary
allocation to the assets and liabilities are as follows:
(Dollars in
thousands)
Preliminary allocation of purchase cost:
Net assets of ANC Food Metal & Specialty Business
at historical amounts at June 30, 1995 $ 397,714
Current assets not acquired ( 43,175)
Other assets not acquired (146,236)
Other assets acquired (1,710)
Other liabilities not assumed 96,224
Other liabilities assumed ( 37,200)
(132,097)
Adjustments to historical balance of property, plant
and equipment acquired to reflect current fair value 49,019
Cost in excess of fair value of net assets acquired 25,039
Increase in net working capital during the period from
June 30, 1995 through August 1, 1995 24,295
363,970
Estimated fees and expenses related to financing
the transaction 21,000
Total purchase cost $384,970
28
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS AND NARRATIVE DISCLOSURE
(REFLECTING THE ACQUISITION OF AMERICAN NATIONAL CAN COMPANY'S
FOOD METAL & SPECIALTY DIVISION)
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Introductory Note
(continued)
The pro forma adjustments are based upon available information and upon
certain assumptions that Silgan believes are reasonable. The final
purchase price allocation may differ from that shown above, although it is
not expected to differ materially.
The pro forma financial data do not purport to be indicative of Silgan's
financial position or results that would actually have been obtained had
such transactions been completed as of the date or for the periods
presented, or to project Silgan's financial position or results of
operations at any future date or for any future period.
The unaudited pro forma statements of operations include adjustments for
depreciation, goodwill amortization and interest expense (including debt
amortization) based upon the allocated cost of the acquisition and its
related financing. In addition, estimated pro forma adjustments have been
made to reflect manufacturing cost savings which management believes will
be realized upon the combination of Silgan's can manufacturing operations
and that of ANC Food Metal & Specialty Business, as well as reduced SG&A
expenditures which will be realized from the planned integration of sales,
administrative and research functions. The pro forma statement of
operations for the year ended December 31, 1994 includes a restructuring
provision of $10.1 million. This charge represented a provision for shut
down costs incurred by ANC Food Metal & Specialty Business during the final
phase of its four-year rationalization program in which assets of its
business were realigned to match more closely the existing customer base.
The 1994 pro forma statement of operations also includes one-time charges
of $16.7 million and $7.1 million incurred by Silgan and the ANC Food Metal
& Specialty Business, respectively, to adjust the carrying value of certain
technologically obsolete and inoperable equipment and of $26.7 million
incurred by ANC Food Metal & Specialty Business for the write-down of
goodwill. The pro forma statements of operations reflect non-cash charges
for depreciation and goodwill amortization of $27.4 million for the six
months ended June 30, 1995 and $58.5 million for the year ended December
31, 1994.
29
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS AND NARRATIVE DISCLOSURE
(REFLECTING THE ACQUISITION OF AMERICAN NATIONAL CAN COMPANY'S
FOOD METAL & SPECIALTY DIVISION)
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Introductory Note
(continued)
During the last five months of 1995, the Company will be incurring
redundant and one-time costs as it integrates the selling, administrative
and research functions of its business to accomplish the savings set forth
in the pro forma statements of operations. Under current accounting
pronouncements, these costs will be charged against operating income.
Accordingly, earnings for the year ended December 31, 1995 will not reflect
the full benefits estimated from the integration of the businesses as
presented in the accompanying pro forma statement of operations.
As required, the Company has also not given pro forma effect to the
anticipated benefits it may realize as a result of the planned
rationalization of its plant operations.
The acquisition of the ANC Food Metal & Specialty Business occurred as of
August 1, 1995. As part of the acquisition, Containers intends to acquire
the operations of the St. Louis, MO facility of the ANC Food Metal &
Specialty Business upon completion by American National Can Company of a
rationalization project at that facility. The Company anticipates that the
St. Louis operations will be acquired by mid-1996. The estimated purchase
price of approximately $15.2 million and related assumption of certain post
retirement benefit obligations for active employees related to future
service has been included in the pro forma presentation on the assumption
that its purchase was coincident with the acquisition of the remainder of
the ANC Food Metal & Specialty Business.
On August 1, 1995, Silgan Corporation, a wholly-owned subsidiary of the
Company, and its subsidiaries entered into a $675.0 million credit
facility, the proceeds of which were used to finance the acquisition,
refinance in full Silgan Corporation's outstanding secured debt
obligations, and to fund the repurchase of up to $75.0 million of Holdings'
discount debentures. On the date the facility was entered into, Silgan
Corporation borrowed $512.8 million to fund the acquisition and to repay
the existing bank debt. On August 31, 1995, as part of the $675.0 million
credit facility, the banks lent $50 million of A term loans to fund in full
the prepayment of Silgan Corporation's senior secured notes.
30
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS AND NARRATIVE DISCLOSURE
(REFLECTING THE ACQUISITION OF AMERICAN NATIONAL CAN COMPANY'S
FOOD METAL & SPECIALTY DIVISION)
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Introductory Note
(continued)
The credit facility permits the Company at any time prior to June 30, 1996
to repurchase up to $75.0 million of its 13/% Discount Debentures through
borrowings of working capital loans. The commitment under the credit
facility for working capital loans was initially $150.0 million, increasing
at the time and by the amount of such repurchases by the Company of its
discount debentures (up to a maximum commitment of $225.0 million). During
August and September, the Company repurchased $57.6 million of its
outstanding 13/% Discount Debentures, and presently the commitment under
the credit facility for working capital loans is $207.6 million. The
Company intends to make additional borrowings of working capital loans of
up to $17.4 million for the repurchase of its discount debentures and up to
$15.2 million to fund the acquisition of the St. Louis operations.
The pro forma unaudited balance sheet reflects the acquisition (including
the purchase of the St. Louis operations), the financing of such
acquisition, the refinancing of all of Silgan Corporation's secured debt
obligations and the repurchase of $75.0 million of the Company's discount
debentures, as if all of these events occurred as of June 30, 1995. For
illustration purposes, presented below is a table reflecting the sources
and uses of funds, hypothetically, for the acquisition, refinancings and
repurchases described above (assuming that all these events occurred as of
June 30, 1995). The drawdown of the bank revolver presented in the table
below is greater than the amount of revolver borrowings which will actually
be outstanding because the table does not reflect cash generated from
operations during the period from the acquisition date until the
acquisition of the St. Louis facility and/or the final repurchase of
discount debentures. The hypothetical sources and uses of the fundings are
as follows:
31
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS AND NARRATIVE DISCLOSURE
(REFLECTING THE ACQUISITION OF AMERICAN NATIONAL CAN COMPANY'S
FOOD METAL & SPECIALTY DIVISION)
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Introductory Note
(continued)
Borrowings at
Acquisition Additional
Date Borrowings Total
(In millions)
Source
Proceeds from A Term Loan $175.0 $ 50.0 $225.0
Proceeds from B Term Loan 225.0 - 225.0
Drawdown of Bank Revolver 112.8 100.4 213.2(1)
$512.8 $150.4 $663.2
Uses
Acquisition of ANC Food Metal &
Specialty Business $336.3 $ - $336.3
ANC purchase price adjustment - 10.2 10.2
Acquisition of St. Louis facility - 15.2 15.2
Repay outstanding bank debt 155.5 - 155.5
Repay Senior Secured Notes - 50.0 50.0
Repurchase Discount Debentures - 75.0 75.0
Transaction fees 21.0 - 21.0
$512.8 $150.4 $663.2
(1) Hypothetical amount due to the timing of certain uses.
Because the Company sells metal containers used in vegetable and fruit
processing, its sales are seasonal. As is common in the packaging
industry, Silgan must build inventory prior to the pack season and carry
accounts receivable beyond the end of the season. Seasonal accounts are
generally settled by year end. The acquisition of the ANC Food Metal &
Specialty Business increased the Company'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
($150.0 million initially, increasing to a maximum of $225.0 million as
discussed above). Because the Company's acquisition of the ANC Food Metal
& Specialty Business occurred near its seasonal peak, the purchase price
included $162.9 million for the net working capital of the business. If
the acquisition had occurred at December 31, 1994, the working capital
component of the purchase price would have been $56.9 million, or $106.0
million less than the net working capital at the time of the acquisition.
The Company believes that its seasonal peak occurred in late September,
when approximately $191.0 million of the working capital revolver,
including letters of credit, was utilized.
32
SILGAN HOLDINGS INC.
PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
JUNE 30, 1995
(Dollars in thousands)
ANC Food
Metal &
Specialty Pro Forma
Historical Business Adjustments Pro Forma
ASSETS
Current assets:
Cash and cash equivalents $ 841 $ 6 $ $ 847
Accounts receivable, net 74,926 74,681 ( 9,500)(a) 140,107
Inventories 164,138 160,574 (11,610)(a) 313,102
Prepaid expenses and other
current assets 6,185 22,259 (22,065)(a) 6,379
Total current assets 246,090 257,520 (43,175) 460,435
Property, plant & equipment, net 255,453 191,060 49,019 (b) 495,532
Goodwill, net 29,389 144,211 (119,172)(c) 54,428
Other assets 21,244 2,145 10,964(a)(d) 34,353
$552,176 $594,936 $(102,364) $1,044,748
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable $ 44,826 $ 71,223 $ - $ 116,049
Accrued payroll & related costs 25,307 10,656 ( 651)(a) 35,312
Accrued interest payable 1,735 - - 1,735
Accrued expenses & other
current liabilities 20,457 36,166 ( 31,828)(a) 24,795
Amount due ANC - - 15,200 (e) 15,200
Bank working capital loans 39,750 - 135,308 (f) 175,058
Current portion of long-term
debt 19,514 - ( 13,014)(f) 6,500
Total current liabilities 151,589 118,045 105,015 374,649
Long-term debt 525,884 - 220,932 (f) 746,816
Deferred income taxes 6,831 17,061 ( 17,061)(a) 6,831
Other long-term liabilities 23,750 62,116 ( 7,235)(a)(g) 78,631
Deficiency in stockholders' equity:
Investment by and advances
from ANC - 398,214 (398,214)(h) -
Equity adjustment for minimum
pension - ( 500) 500 (a) -
Common stock 12 - - 12
Additional paid-in capital 33,606 - - 33,606
Accumulated deficit (189,496) - ( 6,301)(i) (195,797)
Total deficiency in
stockholders' equity (155,878) 397,714 (404,015) (162,179)
$552,176 $594,936 $(102,364) $1,044,748
33
SILGAN HOLDINGS INC.
NOTES TO PRO FORMA UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1995
(a) Elimination of assets not acquired and liabilities not assumed
pursuant to the Asset Purchase Agreement net of adjustments to restate
assets acquired and liabilities assumed to fair value.
(b) Adjustment of property, plant and equipment to estimated fair market
value based upon preliminary appraisals and evaluations.
(c) Adjustment to eliminate historical goodwill and record excess cost
over estimated fair market value of net assets acquired.
(d) Adjustment to eliminate deferred debt financing costs related to
retired debt facilities and record deferred financing costs for new
Credit Agreement. Due to the net operating loss position of Holdings,
a valuation allowance has been provided for the net deferred tax asset
resulting from the acquisition and has accordingly increased goodwill.
(e) Estimated amount due American National Can Company related to the
purchase of additional can manufacturing assets (and the related
assumption of certain limited liabilities) at its St. Louis plant
which will be sold to Silgan Containers Corporation, no later than
December 31, 1996, upon the completion of a restructuring at that
facility.
(f) Borrowings under the Credit Agreement which were used to finance the
acquisition of ANC Food Metal & Specialty Business (net of an
adjustment for the increase in seasonal working capital during the
period from June 30, 1995 to August 1, 1995, the closing date), repay
amounts outstanding under the old credit agreement and amounts owed
under Silgan Corporation's Secured Notes, repurchase of $75 million of
the Company's discount debentures and pay fees and expenses associated
with the new credit facility.
(g) Adjustment to record (i) assumption of post-retirement medical benefit
obligation for active employees, including the amount related to the
St. Louis operations ($19.7 million), (ii) assumption of contracted
future liabilities relating to employee pension benefit plans ($5.2
million), and (iii) employee termination costs associated with plant
rationalization and administrative workforce reduction, other plant
exit costs and employee relocation costs ($30.0 million).
(h) Elimination of investment by ANC.
(i) Reflects charge to equity for unamortized deferred financing costs
related to the repayment of amounts outstanding under the old credit
agreement, the Secured Notes and an allocable portion of the discount
debentures.
34
SILGAN HOLDINGS INC.
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(Dollars in thousands)
ANC Food
Metal &
Specialty Pro Forma
Historical Business AdjustmentsPro
Forma
(a)
Net sales $404,990 $245,052 $ - $650,042
1,835 (b)
(1,839)(c)
(17,047)(d)
Cost of goods sold 346,144 232,461 ( 4,000)(e) 557,555
Gross profit 58,846 12,591 21,050 92,487
134 (b)
Selling, general and ( 1,244)(d)
administrative expenses 17,729 16,880 ( 6,500)(f) 26,999
Income (loss) from
operations 41,117 ( 4,289) 28,660 65,488
Interest expense and other 4,178 (g)
related financing costs 34,797 6,258 ( 159)(h) 45,074
Income before income taxes 6,320 (10,547) 24,641 20,414
Income tax provision
(benefit) 4,200 ( 3,256) 6,356 (i) 7,300
Income before
extraordinary item (j) $ 2,120 $( 7,291) $ 18,285 $ 13,114
35
SILGAN HOLDINGS INC.
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(Dollars in thousands)
ANC Food
Metal &
Specialty Pro Forma
Historical Business AdjustmentsPro
Forma
(a)
Net sales $861,374 $ 596,594 $ - $1,457,968
3,560 (b)
( 4,383)(c)
(35,176)(d)
Cost of goods sold 747,457 572,508 ( 8,000)(e) 1,275,966
Gross profit 113,917 24,086 43,999 182,002
252 (b)
Selling, general and ( 2,486)(d)
administrative expenses 38,830 34,930 (13,000)(f) 58,526
Restructuring expense - 10,100 - 10,100
Reduction in carrying value
of assets 16,729 33,762 - 50,491
Income (loss) from
operations 58,358 ( 54,706) 59,233 62,885
Interest expense and other 21,796 (g)
related financing costs 65,789 2,255 ( 318)(h) 89,522
Loss before income taxes ( 7,431) ( 56,961) 37,755 (26,637)
Income tax provision (benefit) 5,600 ( 9,804) 6,904 (i) 2,700
Loss before
extraordinary item (j) $(13,031) $( 47,157) $ 30,851 $ (29,337)
36
SILGAN HOLDINGS INC.
NOTES TO PRO FORMA UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
AND YEAR ENDED DECEMBER 31, 1994
(a) Restated ANC Food Metal & Specialty Business financial information to
conform to Silgan presentation.
(b) Increased depreciation charge from historical amount based upon the
estimated fair values of property, plant and equipment acquired with
estimated useful life of 25 years for buildings and improvements and
5-11 years for machinery and equipment.
(c) Decreased charge for amortization of goodwill from historical amount
to reflect amortization of estimated excess fair value over net book
value of assets acquired over 40-year period.
(d) Elimination of pension and post-retirement medical expense for retired
employees because related obligations were not assumed by Silgan.
(e) Decreased cost of goods sold for benefits expected from the
integration of ANC Food Metal & Specialty Business with Silgan's
existing can manufacturing operation.
(f) Decrease in the cost of administrative support services which will be
realized as a result of the integration of the ANC Food Metal &
Specialty Business and Silgan's sales, administrative and research
functions.
(g) Estimated increase in interest expense due to additional bank
borrowings of approximately $420 million at rates ranging from 8.38%
to 8.63% (the current bank borrowing rates) to finance the acquisition
of ANC Food Metal & Specialty Business assets and to fund Silgan's
average working capital requirements plus the repurchase of $75
million of the Company's discount debentures.
(h) Amortization of deferred financing fees of $19.3 million on new debt
over six-year term less elimination of amortization of debt costs on
retired debt.
(i) Adjustment for estimated effective income tax rate as calculated in
accordance with SFAS 109 applied to pro forma income before income
taxes.
(j) The pro forma statement of operations does not reflect the
extraordinary charge resulting from the write-off of unamortized
deferred financing costs.
37