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, 2004
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)
(203)975-7110
|
Registrant's Telephone Number, Including Area Code
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 [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ X ] No [ ]
As of April 30, 2004, the number of shares outstanding of the Registrant's common stock, $0.01 par value, was 18,352,842.
SILGAN HOLDINGS INC.
TABLE OF CONTENTS
Page No.
--------
Part I. Financial Information 3
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets at 3
March 31, 2004 and 2003 and December 31, 2003
Condensed Consolidated Statements of Income for 4
the three months ended March 31, 2004 and 2003
Condensed Consolidated Statements of Cash Flows for 5
the three months ended March 31, 2004 and 2003
Condensed Consolidated Statements of Stockholders' 6
Equity for the three months ended March 31, 2004
and 2003
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial 17
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market 23
Risk
Item 4. Controls and Procedures 23
Part II. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 25
Exhibit Index 26
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Part I. Financial Information
Item 1. Financial Statements
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited, see Note 1)
March 31, March 31, Dec. 31,
2004 2003 2003
---- ---- ----
Assets
Current assets
Cash and cash equivalents ........................ $ 18,510 $ 31,200 $ 12,100
Trade accounts receivable, net ................... 194,333 182,411 159,273
Inventories ...................................... 392,473 357,636 320,194
Prepaid expenses and other current assets ........ 50,258 41,992 53,731
---------- ---------- ----------
Total current assets ......................... 655,574 613,239 545,298
Property, plant and equipment, net .................... 811,891 830,356 817,850
Goodwill, net ......................................... 204,710 195,771 202,421
Other assets .......................................... 54,294 56,913 55,515
---------- ---------- ----------
$1,726,469 $1,696,279 $1,621,084
========== ========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Bank revolving loans ............................. $ 164,500 $ 78,500 $ 25,000
Current portion of long-term debt ................ 23,670 21,670 23,670
Trade accounts payable ........................... 154,857 139,079 211,639
Accrued payroll and related costs ................ 67,060 69,120 65,940
Accrued liabilities .............................. 32,702 36,292 24,518
---------- ---------- ----------
Total current liabilities .................... 442,789 344,661 350,767
Long-term debt ........................................ 953,910 1,084,989 953,910
Other liabilities ..................................... 198,029 196,468 195,602
Stockholders' equity
Common stock ..................................... 210 209 210
Paid-in capital .................................. 127,920 125,009 125,758
Retained earnings ................................ 71,990 23,037 60,905
Accumulated other comprehensive loss ............. (7,986) (17,701) (5,675)
Treasury stock ................................... (60,393) (60,393) (60,393)
---------- ---------- ----------
Total stockholders' equity ................... 131,741 70,161 120,805
---------- ---------- ----------
$1,726,469 $1,696,279 $1,621,084
========== ========== ==========
See accompanying notes.
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SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 2004 and 2003
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
2004 2003
---- ----
Net sales ............................................... $518,331 $454,377
Cost of goods sold ...................................... 456,171 404,780
-------- --------
Gross profit ....................................... 62,160 49,597
Selling, general and administrative expenses ............ 27,626 23,576
Rationalization charges ................................. 990 --
-------- --------
Income from operations ............................. 33,544 26,021
Interest and other debt expense ......................... 15,222 18,789
-------- --------
Income before income taxes and equity in
losses of affiliate ........................... 18,322 7,232
Provision for income taxes .............................. 7,237 2,785
-------- --------
Income before equity in losses of affiliate ........ 11,085 4,447
Equity in losses of affiliate, net of income taxes ...... -- 281
-------- --------
Net income ......................................... $ 11,085 $ 4,166
======== ========
Earnings per share:
Basic net income per share ......................... $0.61 $0.23
===== =====
Diluted net income per share ....................... $0.60 $0.23
===== =====
Weighted average number of shares:
Basic .............................................. 18,308 18,235
Assumed exercise of employee stock options ......... 260 108
------ ------
Diluted ............................................ 18,568 18,343
====== ======
See accompanying notes.
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SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2004 and 2003
(Dollars in thousands)
(Unaudited)
2004 2003
---- ----
Cash flows provided by (used in) operating activities
Net income ............................................. $ 11,085 $ 4,166
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization ...................... 29,603 26,639
Rationalization charges ............................ 990 --
Equity in losses of affiliate ...................... -- 457
Other changes that provided (used) cash, net of
effects from acquisitions:
Trade accounts receivable, net ................ (35,061) (36,053)
Inventories ................................... (72,359) (35,453)
Trade accounts payable ........................ (56,782) (51,373)
Other, net .................................... 12,179 28,520
--------- ---------
Net cash used in operating activities .............. (110,345) (63,097)
--------- ---------
Cash flows provided by (used in) investing activities
Purchases of businesses, net of cash acquired .......... -- (163,233)
Capital expenditures ................................... (24,680) (27,541)
Proceeds from asset sales .............................. 738 40
--------- ---------
Net cash used in investing activities .............. (23,942) (190,734)
--------- ---------
Cash flows provided by (used in) financing activities
Borrowings under revolving loans ....................... 286,300 173,250
Repayments under revolving loans ....................... (146,800) (94,750)
Proceeds from stock option exercises ................... 1,293 118
Proceeds from issuance of long-term debt ............... -- 150,000
Debt issuance costs .................................... (96) (1,905)
--------- ---------
Net cash provided by financing activities .......... 140,697 226,713
--------- ---------
Cash and cash equivalents
Net increase (decrease) ................................ 6,410 (27,118)
Balance at beginning of year ........................... 12,100 58,318
--------- ---------
Balance at end of period ............................... $ 18,510 $ 31,200
========= =========
Interest paid ............................................... $ 10,079 $ 6,465
Income taxes paid, net of refunds ........................... 788 (2,896)
See accompanying notes.
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SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
For the three months ended March 31, 2003 and 2004
(Dollars and shares in thousands)
(Unaudited)
Common Stock Accumulated
------------ Paid- other Total
Par in Retained comprehensive Treasury stockholders'
Shares value capital earnings income (loss) stock equity
------ ----- -------- -------- ------------- -------- -------------
Balance at December 31, 2002 ............. 18,231 $209 $124,872 $18,871 $(20,467) $(60,393) $ 63,092
Comprehensive income:
Net income ............................ -- -- -- 4,166 -- -- 4,166
Change in fair value of derivatives,
net of tax provision of $329 ........ -- -- -- -- 404 -- 404
Foreign currency translation .......... -- -- -- -- 2,362 -- 2,362
--------
Comprehensive income ..................... 6,932
Stock option exercises, including
tax benefit of $19 ..................... 8 -- 137 -- -- -- 137
------ ---- -------- ------- -------- -------- --------
Balance at March 31, 2003 ................ 18,239 $209 $125,009 $23,037 $(17,701) $(60,393) $ 70,161
====== ==== ======== ======= ======== ======== ========
Balance at December 31, 2003 ............. 18,273 $210 $125,758 $60,905 $ (5,675) $(60,393) $120,805
Comprehensive income:
Net income ............................ -- -- -- 11,085 -- -- 11,085
Change in fair value of derivatives,
net of tax benefit of $1,182 ......... -- -- -- -- (1,814) -- (1,814)
Foreign currency translation .......... -- -- -- -- (497) -- (497)
--------
Comprehensive income ..................... 8,774
Stock option exercises, including
tax benefit of $869 .................... 80 -- 2,162 -- -- -- 2,162
------ ---- -------- ------- -------- -------- --------
Balance at March 31, 2004 ................ 18,353 $210 $127,920 $71,990 $ (7,986) $(60,393) $131,741
====== ==== ======== ======= ======== ======== ========
See accompanying notes.
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SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2004 and 2003 and for the three months then ended is unaudited)
Note 1. Significant Accounting Policies
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of Silgan Holdings Inc., or Holdings, have been prepared in accordance with accounting principles generally accepted in the United States 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 accounting principles generally accepted in the United States 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, 2003 has been derived from our audited consolidated financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
You should read the accompanying condensed consolidated financial statements in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2003.
Certain prior year amounts have been reclassified to conform with the current year's presentation.
Stock-Based Compensation. We have two stock-based compensation plans. We apply the recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for these plans. Accordingly, no compensation expense for employee stock options is recognized, as all options granted under these plans had an exercise price that was equal to or greater than the market value of the underlying stock on the date of the grant.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2004 and 2003 and for the three months then ended is unaudited)
Note 1. Significant Accounting Policies (continued)
Stock-Based Compensation (continued). If we had applied the fair value recognition provisions of Statement of Financial Accounting Standards, or SFAS, No. 123, "Accounting for Stock-Based Compensation," for the three months ended March 31, net income and basic and diluted earnings per share would have been as follows:
2004 2003
---- ----
(Dollars in thousands, except per share data)
Net income, as reported .................................... $11,085 $4,166
Deduct: Total stock-based employee
compensation expense determined under
fair value method for all stock option
awards, net of income taxes ............................ 475 324
------- -------
Pro forma net income ....................................... $10,610 $3,842
======= =======
Earnings per share:
Basic net income per share - as reported ............... $0.61 $0.23
===== =====
Basic net income per share - pro forma ................. 0.58 0.21
===== =====
Diluted net income per share - as reported ............. $0.60 $0.23
===== =====
Diluted net income per share - pro forma ............... 0.57 0.21
===== =====
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Recently Adopted Accounting Pronouncements. In January 2003, the Financial Accounting Standards Board, or the FASB, issued Interpretation, or FIN, No. 46, "Consolidation of Variable Interest Entities," which expands upon existing accounting guidance on consolidation. A variable interest entity either does not have equity investors with voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN No. 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or is entitled to receive a majority of the entity's residual returns. The provisions of FIN No. 46 were effective for us on March 31, 2004. The adoption of FIN No. 46 did not effect our financial position or results of operations.
Note 2. Acquisitions
In January 2003, we acquired substantially all of the assets of Thatcher Tubes LLC and its affiliates, or Thatcher Tubes, a privately held manufacturer and marketer of decorated plastic tubes serving primarily the personal care industry. Including additional production capacity installed shortly before the acquisition, the purchase price for the assets was approximately $32 million in cash. Thatcher Tubes operates as part of our plastic container business.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2004 and 2003 and for the three months then ended is unaudited)
Note 2. Acquisitions (continued)
In March 2003, we acquired the remaining 65 percent equity interest in the Amcor White Cap, LLC, or White Cap, joint venture that we did not already own from Amcor White Cap, Inc. for approximately $37 million in cash. Additionally, we refinanced debt of White Cap and purchased equipment subject to a third party lease for approximately $93 million. The business operates as part of our metal food container business.
In April 2003, we acquired PCP Can Manufacturing, Inc., or Pacific Coast Can, a subsidiary of Pacific Coast Producers, or Pacific Coast, through which Pacific Coast self-manufactured a majority of its metal food containers. The purchase price was approximately $44 million in cash, including approximately $29 million for inventory. As part of the transaction, we entered into a ten-year supply agreement with Pacific Coast under which Pacific Coast has agreed to purchase from us substantially all of its metal food container requirements. Pacific Coast Can operates as part of our metal food container business.
These acquisitions were accounted for using the purchase method of accounting. Accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, and the businesses' results of operations have been included in our consolidated operating results from the date of acquisition. The allocation of purchase price was finalized during the first quarter of 2004 when valuations and integration plans were completed.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2004 and 2003 and for the three months then ended is unaudited)
Note 3. Rationalization Charges and Acquisition Reserves
As part of our plans to integrate the operations of our various acquired businesses and to rationalize certain facilities, we have established reserves for employee severance and benefits and plant exit costs. Activity in our rationalization and acquisition reserves since December 31, 2003 is summarized as follows:
Employee Plant Non-Cash
Severance Exit Asset
and Benefits Costs Write-Down Total
------------ ----- ---------- -----
(Dollars in thousands)
Balance at December 31, 2003
----------------------------
Fairfield Rationalization .................................. $ -- $1,273 $ -- $ 1,273
2003 Acquisitions .......................................... 3,284 1,036 -- 4,320
2003 Rationalizations ...................................... 595 971 -- 1,566
------- ------ ----- -------
Balance at December 31, 2003 ............................... 3,879 3,280 -- 7,159
Activity for the Three Months Ended March 31, 2004
--------------------------------------------------
Fairfield Rationalization .................................. -- (92) -- (92)
Finalization of 2003 Acquisition Plan Reserves ............. (103) 88 -- (15)
2003 Acquisition Plan Reserves Utilized .................... (2,106) (471) -- (2,577)
2003 Rationalization Plan Reserves Established ............. 480 85 -- 565
2003 Rationalization Plan Reserves Utilized ................ (700) (140) -- (840)
Benton Harbor Rationalization Reserve Established .......... 173 11 241 425
Benton Harbor Rationalization Reserve Utilized ............. -- -- (241) (241)
------- ------ ----- -------
Total Activity ............................................. (2,256) (519) -- (2,775)
Balance at March 31, 2004
-------------------------
Fairfield Rationalization .................................. -- 1,181 -- 1,181
2003 Acquisitions .......................................... 1,075 653 -- 1,728
2003 Rationalizations ...................................... 375 916 -- 1,291
Benton Harbor Rationalization .............................. 173 11 -- 184
------- ------ ----- -------
Balance at March 31, 2004 .................................. $ 1,623 $2,761 $ -- $ 4,384
======= ====== ===== =======
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SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2004 and 2003 and for the three months then ended is unaudited)
Note 3. Rationalization Charges and Acquisition Reserves (continued)
During the first quarter of 2004, we approved and announced to employees a plan to exit our Benton Harbor, Michigan metal food container manufacturing facility. This decision resulted in a charge to earnings of $0.4 million, which consisted of $0.2 million for the non-cash write-down in carrying value of assets and $0.2 million for employee severance and benefits costs. Additional rationalization charges of approximately $0.2 million are expected in the second quarter of 2004, bringing the total expected charges related to this plan to an aggregate of $0.6 million in 2004. Through March 31, 2004, there were no cash payments related to closing this facility. All cash payments related to these reserves are expected in 2004.
During 2003, we established acquisition reserves in connection with our purchases of Thatcher Tubes, White Cap and Pacific Coast Can, recorded pursuant to plans that we began to assess and formulate at the date of the acquisitions. During the first quarter of 2004, we finalized these plans and the related acquisition reserves. These plans included exiting the Lodi, California metal food container manufacturing facility, the Chicago, Illinois and Queretaro, Mexico metal closures manufacturing facilities and the Culiacan, Mexico plastic container manufacturing facility, as well as the consolidation of certain administrative functions of the acquired businesses. All of these facilities have ceased manufacturing operations. During the first quarter of 2004, we made cash payments totaling $2.6 million related to these plans. At March 31, 2004, these reserves had an aggregate balance of $1.7 million. All cash payments related to these plans are expected in 2004.
During 2003, we approved and announced to employees plans to exit our Norwalk, Connecticut and Anaheim, California plastic container manufacturing facilities and our Queretaro, Mexico metal closures manufacturing facility, as well as to consolidate certain administrative functions of the closures business. These decisions resulted in a charge to earnings of $9.0 million ($1.2 million for the metal food container business and $7.8 million for the plastic container business) in 2003, which included $5.3 million for the non-cash write-down in carrying value of assets. During the first quarter of 2004, additional rationalization charges of $0.6 million were recorded related to these plans. Additional rationalization charges of approximately $0.1 million are expected in the second quarter of 2004, bringing the total expected charges related to these plans to an aggregate of $0.7 million in 2004. During the first quarter of 2004, we made cash payments totaling $0.8 million related to these plans. At March 31, 2004, these reserves had an aggregate balance of $1.3 million. The timing of certain cash payments related to these reserves is dependent upon the expiration of a lease obligation. Therefore, cash payments related to these reserves are expected through 2010.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2004 and 2003 and for the three months then ended is unaudited)
Note 3. Rationalization Charges and Acquisition Reserves (continued)
Rationalization and acquisition reserves are included in the Condensed Consolidated Balance Sheets as follows:
March 31, March 31, Dec. 31,
2004 2003 2003
---- ---- ----
(Dollars in thousands)
Accrued liabilities ............... $2,797 $1,307 $5,572
Other liabilities ................. 1,587 1,647 1,587
------ ------ ------
$4,384 $2,954 $7,159
====== ====== ======
|
Note 4. Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) is reported in the Condensed Consolidated Statements of Stockholders' Equity. Amounts included in accumulated other comprehensive income (loss) consisted of the following:
March 31, March 31, Dec. 31,
2004 2003 2003
---- ---- ----
(Dollars in thousands)
Foreign currency translation ................ $ 4,138 $ 364 $ 4,635
Change in fair value of derivatives ......... (2,575) (2,410) (761)
Minimum pension liability ................... (9,549) (15,655) (9,549)
------- -------- -------
Accumulated other comprehensive loss ..... $(7,986) $(17,701) $(5,675)
======= ======== =======
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SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2004 and 2003 and for the three months then ended is unaudited)
Note 5. Inventories
Inventories consisted of the following:
March 31, March 31, Dec. 31,
2004 2003 2003
---- ---- ----
(Dollars in thousands)
Raw materials ............................... $ 35,119 $ 36,402 $ 36,732
Work-in-process ............................. 61,538 53,758 52,815
Finished goods .............................. 280,115 244,690 213,481
Spare parts and other ....................... 19,708 20,658 20,267
-------- -------- --------
396,480 355,508 323,295
Adjustment to value inventory
at cost on the LIFO method .............. (4,007) 2,128 (3,101)
-------- -------- --------
$392,473 $357,636 $320,194
======== ======== ========
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Note 6. Investment in Affiliate
Prior to March 2003, we held a 35 percent interest in a joint venture company with Amcor Ltd. that was a leading supplier of an extensive range of metal and plastic closures to consumer goods packaging companies in the food and beverage industries in North America. The venture operated under the name Amcor White Cap, LLC. As discussed in Note 2, in March 2003, we acquired the remaining 65 percent equity interest in the White Cap joint venture that we did not already own. The business now operates under the name Silgan Closures LLC, or Silgan Closures.
Prior to our acquisition of White Cap, we accounted for our investment in the White Cap joint venture using the equity method. For the first two months of 2003, we recorded equity in losses of White Cap of $0.3 million, net of income taxes. The results of Silgan Closures since March 2003 have been included with the results of our metal food container business.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2004 and 2003 and for the three months then ended is unaudited)
Note 7. Long-Term Debt
Long-term debt consisted of the following:
March 31, March 31, Dec. 31,
2004 2003 2003
---- ---- ----
(Dollars in thousands)
Bank debt
Bank revolving loans .......................... $ 164,500 $ 78,500 $ 25,000
Bank A term loans ............................. 83,330 100,000 83,330
Bank B term loans ............................. 691,250 498,250 691,250
---------- ---------- ----------
Total bank debt ............................ 939,080 676,750 799,580
Subordinated debt
6 3/4% Senior Subordinated Notes .............. 200,000 -- 200,000
9% Senior Subordinated Debentures ............. -- 505,409 --
Other ......................................... 3,000 3,000 3,000
---------- ---------- ----------
Total subordinated debt .................... 203,000 508,409 203,000
---------- ---------- ----------
Total debt ......................................... 1,142,080 1,185,159 1,002,580
Less current portion .......................... 188,170 100,170 48,670
---------- ---------- ----------
$ 953,910 $1,084,989 $ 953,910
========== ========== ==========
|
In March 2004, we entered into interest rate swap agreements for an aggregate notional principal amount of $150 million. Under these agreements, we will pay a fixed rate of interest of 1.8 percent and receive a floating rate of interest based on three month LIBOR. These agreements mature in March 2006 and are accounted for as cash flow hedges.
At March 31, 2004, amounts expected to be repaid within one year consisted of $164.5 million of bank revolving loans related primarily to seasonal working capital needs and $23.7 million of bank term loans.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2004 and 2003 and for the three months then ended is unaudited)
Note 8. Retirement Benefits
The components of the net periodic benefit cost for the three months ended March 31 are as follows:
Other
Pension Benefits Postretirement Benefits
------------------------ -------------------------
2004 2003 2004 2003
---- ---- ---- ----
(Dollars in thousands)
Service cost ..................................... $ 3,188 $ 2,310 $ 787 $ 527
Interest cost .................................... 4,959 3,538 1,462 1,094
Expected return on plan assets ................... (5,571) (3,096) -- --
Amortization of prior service cost ............... 814 343 2 1
Amortization of actuarial losses ................. 438 700 291 80
Curtailment loss ................................. -- 37 -- --
------- ------- ------ ------
Net periodic benefit cost ........................ $ 3,828 $ 3,832 $2,542 $1,702
======= ======= ====== ======
|
In December 2003, the U.S. enacted into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003, or the Act. The Act introduces a prescription drug benefit under Medicare, or Medicare Part D, as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Plan D.
In January 2004, the FASB issued FASB Staff Position, or FSP, No. 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." Specific authoritative guidance on the accounting for the federal subsidy is pending, and therefore we have elected to defer accounting for the effects of the Act as permitted by FSP No. 106-1. As a result, in accordance with FSP No. 106-1, our accumulated other postretirement benefit obligation and net periodic other postretirement benefit costs do not reflect the effects of the Act on the plans. Specific authoritative guidance, when issued, could require us to change previously reported information.
As previously disclosed in our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2003, based on current tax law, the minimum required contributions to our pension plans are expected to be approximately $6.1 million in 2004. However, this estimate is subject to change based on asset performance significantly above or below the assumed long-term rate of return on plan assets. It has been our practice to make contributions in accordance with ERISA minimum requirements, except that under certain circumstances we may make contributions, up to the extent they are tax deductible, in excess of the minimum amounts required in order to reduce our unfunded pension liability. During the first quarter of 2004, we have made no contributions to fund our pension plans for 2004.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 2004 and 2003 and for the three months then ended is unaudited)
Note 9. Business Segment Information
Reportable business segment information for the three months ended March 31 is as follows:
Metal Food Plastic
Containers(1) Containers(2) Corporate Total
---------- ---------- --------- -----
(Dollars in thousands)
2004
----
Net sales .................................... $372,936 $145,395 $ -- $518,331
Depreciation and amortization(3) ............. 18,037 10,580 9 28,626
Segment income from operations ............... 21,130 13,866 (1,452) 33,544
2003
----
Net sales .................................... $315,429 $138,948 $ -- $454,377
Depreciation and amortization(3) ............. 15,641 10,062 11 25,714
Segment income from operations ............... 11,789 15,474 (1,242) 26,021
-------------
|
(1) Segment income from operations includes rationalization charges of $0.7
million recorded for the three months ended March 31, 2004.
(2) Segment income from operations includes rationalization charges of $0.3
million recorded for the three months ended March 31, 2004.
(3) Depreciation and amortization excludes amortization of debt issuance costs
of $1.0 million and $0.9 million for the three months ended March 31, 2004
and 2003, respectively.
Total segment income from operations is reconciled to income before income taxes and equity in losses of affiliate for the three months ended March 31 as follows:
2004 2003
---- ----
(Dollars in thousands)
Total segment income from operations ........ $33,544 $26,021
Interest and other debt expense ............. 15,222 18,789
------- -------
Income before income taxes and
equity in losses of affiliate ........... $18,322 $ 7,232
======= =======
|
Note 10. Subsequent Event
In April 2004, our Board of Directors initiated a quarterly dividend on our common stock and approved a $0.15 per share quarterly cash dividend, payable on June 15, 2004 to holders of record of our common stock on June 1, 2004. The cash payment for this dividend is expected to be approximately $2.8 million.
Item 2.
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 us and therefore involve a number of uncertainties and risks, including, but not limited to, those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and our other filings with the Securities and Exchange Commission. As a result, the actual results of our operations or our financial condition could differ materially from those expressed or implied in these forward-looking statements.
General
We are a leading North American manufacturer of metal and plastic consumer goods packaging products. We produce steel and aluminum containers for human and pet food, metal, composite and plastic closures for food and beverage products and custom designed plastic containers, tubes and closures for personal care, health care, pharmaceutical, household and industrial chemical, food, pet care, agricultural chemical, automotive and marine chemical products. We are the largest manufacturer of metal food containers in North America, with a unit volume market share in the United States for the year ended December 31, 2003 of approximately 51 percent, a leading manufacturer of plastic containers in North America for personal care products and a leading manufacturer of metal, composite and plastic vacuum closures in North America for food and beverage products.
Our objective is to increase shareholder value by efficiently deploying capital and management resources to grow our business, reduce operating costs, build sustainable competitive positions, or franchises, and complete acquisitions that generate attractive cash returns. We have grown our net sales over the years, largely through acquisitions but also through internal growth, and we continue to evaluate acquisition opportunities in the consumer goods packaging market. However, in the absence of such acquisition opportunities, we expect to use our cash flow to repay debt or for other permitted purposes. As we previously announced, in the absence of compelling acquisitions, we intend to continue to focus on reducing our debt and expect to reduce our debt by $200 - $300 million over the next three years, of which at least $75 million is expected in 2004.
RESULTS OF OPERATIONS
The following table sets forth certain unaudited income statement data expressed as a percentage of net sales for the three months ended March 31:
2004 2003
---- ----
Net sales
Metal food containers............................... 72.0% 69.4%
Plastic containers.................................. 28.0 30.6
----- -----
Consolidated..................................... 100.0 100.0
Cost of goods sold.................................... 88.0 89.1
----- -----
Gross profit.......................................... 12.0 10.9
Selling, general and administrative expenses.......... 5.3 5.2
Rationalization charges............................... 0.2 --
----- -----
Income from operations................................ 6.5 5.7
Interest and other debt expense....................... 3.0 4.1
----- -----
Income before income taxes and equity in losses
of affiliate........................................ 3.5 1.6
Provision for income taxes............................ 1.4 0.6
----- -----
Income before equity in losses of affiliate........... 2.1 1.0
Equity in losses of affiliate, net of income taxes.... -- 0.1
----- -----
Net income............................................ 2.1% 0.9%
===== =====
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Summary unaudited results of operations for the three months ended March 31 are provided below.
2004 2003
---- ----
(Dollars in millions)
Net sales
Metal food containers ................ $372.9 $315.4
Plastic containers ................... 145.4 139.0
------ ------
Consolidated ...................... $518.3 $454.4
====== ======
Income from operations
Metal food containers(1) ............. $ 21.1 $ 11.8
Plastic containers(2) ................ 13.9 15.5
Corporate ............................ (1.5) (1.3)
------ ------
Consolidated ...................... $ 33.5 $ 26.0
====== ======
-------------
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(1) Includes rationalization charges of $0.7 million recorded in the first
quarter of 2004.
(2) Includes rationalization charges of $0.3 million recorded in the first
quarter of 2004.
Three Months Ended March 31, 2004 Compared with Three Months Ended March 31, 2003
Overview. Consolidated net sales were $518.3 million in the first quarter of 2004, representing a 14.1 percent increase as compared to the first quarter of 2003 primarily as a result of the inclusion of net sales of Silgan Closures, as well as higher net sales in both the metal food and plastic container businesses. Income from operations for the first quarter of 2004 increased by $7.5 million, or 28.8 percent, as compared to the same period in 2003 due to higher income from operations in the metal food container business, partially offset by lower income from operations in the plastic container business. Operating margin for the first quarter of 2004 increased by 0.8 percentage points as compared to the same period in 2003 as a result of a higher operating margin in the metal food container business, partially offset by a lower operating margin in the plastic container business. Net income for the first quarter of 2004 of $11.1 million, or $0.60 per diluted share, increased by $6.9 million, or $0.37 per diluted share, as compared to the same period in 2003 as a result of the items previously discussed, as well as lower interest and other debt expense.
Net Sales. The $63.9 million increase in consolidated net sales in the first quarter of 2004 as compared to the first quarter of 2003 was the result of higher net sales in both the metal food and plastic container businesses.
Net sales for the metal food container business increased $57.5 million, or 18.2 percent, in the first quarter of 2004 as compared to the same period in 2003. This increase was primarily attributable to the inclusion of net sales of Silgan Closures, as well as higher food can unit volume.
Net sales for the plastic container business in the first quarter of 2004 increased $6.4 million, or 4.6 percent, as compared to the same period in 2003. This increase was primarily a result of higher average selling prices due to the pass through of increased resin costs and higher unit volume.
Gross Profit. The increase in gross profit margin for the first quarter of 2004 as compared to the same period in 2003 was principally due to increased sales of value-added products and the inclusion of Silgan Closures, partially offset by certain price concessions in the plastic container business, inflation in employee benefit costs and higher depreciation expense.
Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of consolidated net sales for the first quarter of 2004 were 0.1 percentage points higher than in the same period in 2003.
Income from Operations. Income from operations for the first quarter of 2004 increased by $7.5 million as compared to the first quarter of 2003 and operating margin increased to 6.5 percent from 5.7 percent. Results for the first quarter of 2004 included rationalization charges totaling $1.0 million related to closing several manufacturing facilities.
Income from operations of the metal food container business for the first quarter of 2004 increased $9.3 million, or 78.8 percent, as compared to the same period in 2003, and operating margin increased to 5.7 percent from 3.7 percent over the same periods. These increases were principally due to the inclusion of the results of Silgan Closures and the Pacific Coast Can business; the benefits from relatively higher capital spending over the last several years, including spending on our Quick Top(TM) convenience end capacity; and the effect of a more favorable absorption of fixed costs than in the first quarter of 2003 due to an inventory reduction program implemented last year. These favorable items were partially offset by higher depreciation expense, inflation in employee benefit costs and plant rationalization costs of $0.7 million related to closing one manufacturing facility and the continued rationalization and integration of Silgan Closures' operations.
Income from operations of the plastic container business for the first quarter of 2004 decreased $1.6 million, or 10.3 percent, as compared to the same period in 2003, and operating margin decreased to 9.6 percent from 11.2 percent over the same periods. These decreases were primarily a result of certain price concessions made last year but impacting the first quarter of 2004 in response to heightened competitive activity, higher depreciation expense, inflation in employee benefit costs and plant rationalization costs of $0.3 million, partially offset by higher unit volume. Operating margin was also negatively impacted by the mathematical result of higher sales associated with the pass through of higher resin costs without a corresponding increase in income from operations.
Interest and Other Debt Expense. Interest and other debt expense for the first quarter of 2004 decreased $3.6 million to $15.2 million as compared to the same period in 2003. This decrease resulted primarily from a lower average interest rate as a result of the refinancing of all $500 million of the 9% Senior Subordinated Debentures due 2009 in late 2003 with lower cost 6 3/4% Senior Subordinated Notes due 2013 and borrowings under the senior secured credit facility, or the Credit Agreement, partially offset by higher average borrowings due to three acquisitions in 2003.
We have entered into interest rate swap agreements to manage a portion of our exposure to interest rate fluctuations. These interest rate swap agreements effectively convert interest rate exposure from variable rates to fixed rates of interest. At March 31, 2004, the aggregate notional principal amount of these agreements was $700 million (including $250 million notional principal amount that will expire during 2004).
CAPITAL RESOURCES AND LIQUIDITY
Our principal sources of liquidity have been net cash from operating activities and borrowings under the Credit Agreement. Our liquidity requirements arise primarily from our obligations under the indebtedness incurred in connection with our acquisitions and the refinancing of that indebtedness, capital investment in new and existing equipment and the funding of our seasonal working capital needs.
For the three months ended March 31, 2004, we used net borrowings of revolving loans of $139.5 million, proceeds from stock option exercises of $1.3 million and proceeds from asset sales of $0.7 million to fund cash used in operations of $110.3 million primarily for our seasonal working capital needs, capital expenditures of $24.7 million and debt issuance costs of $0.1 million and to increase cash balances by $6.4 million.
For the three months ended March 31, 2003, we used net borrowings of revolving loans of $78.5 million, incremental term loan borrowings of $150 million under the Credit Agreement, cash balances of $27.1 million and proceeds from stock option exercises of $0.1 million to fund the acquisitions of White Cap and Thatcher Tubes for $163.2 million, cash used in operations of $63.1 million primarily for our seasonal working capital needs, capital expenditures of $27.5 million and debt issuance costs of $1.9 million.
Because we sell metal containers used in fruit and vegetable pack processing, we have seasonal sales. As is common in the industry, we must utilize working capital to build inventory and then carry accounts receivable for some customers beyond the end of the packing season. Due to our seasonal requirements, we incur short-term indebtedness to finance our working capital requirements.
At March 31, 2004, we had $164.5 million of revolving loans outstanding under the Credit Agreement related primarily to seasonal working capital needs. After taking into account outstanding letters of credit, the available portion of the revolving loan facility under the Credit Agreement at March 31, 2004 was $212.6 million. We may use the available portion of our revolving loan facility, after taking into account our seasonal needs and outstanding letters of credit, for acquisitions or other permitted purposes. During 2004, we estimate that we will utilize approximately $225 - $250 million of revolving loans under the Credit Agreement for our peak seasonal working capital requirements.
In April 2004, our Board of Directors initiated a quarterly dividend on our common stock and approved a $0.15 per share quarterly cash dividend, payable on June 15, 2004 to holders of record of our common stock on June 1, 2004. The cash payment for this dividend is expected to be approximately $2.8 million.
We believe that cash generated from operations and funds from borrowings available under the Credit Agreement will be sufficient to meet our expected operating needs, planned capital expenditures, debt service, tax obligations and common stock dividends for the foreseeable future. We continue to evaluate acquisition opportunities in the consumer goods packaging market and may incur additional indebtedness, including indebtedness under the Credit Agreement, to finance any such acquisition. However, in the absence of acquisition opportunities that generate attractive cash returns, we expect to use our free cash flow to repay indebtedness or for other permitted purposes.
We are in compliance with all financial and operating covenants contained in our financing agreements and believe that we will continue to be in compliance during 2004 with all of these covenants.
Rationalization Charges and Acquisition Reserves
During the first quarter of 2004, we approved and announced to employees a plan to exit our Benton Harbor, Michigan metal food container manufacturing facility. This decision resulted in a charge to earnings of $0.4 million, which consisted of $0.2 million for the non-cash write-down in carrying value of assets and $0.2 million for employee severance and benefits costs. Additional rationalization charges of approximately $0.2 million are expected in the second quarter of 2004, bringing the total expected charges related to this plan to an aggregate of $0.6 million in 2004. Through March 31, 2004, there were no cash payments related to closing this facility. All cash payments related to these reserves are expected in 2004.
During 2003, we established acquisition reserves in connection with our purchases of Thatcher Tubes, White Cap and Pacific Coast Can, recorded pursuant to plans that we began to assess and formulate at the date of the acquisitions. During the first quarter of 2004, we finalized these plans and the related acquisition reserves. These plans included exiting the Lodi, California metal food container manufacturing facility, the Chicago, Illinois and Queretaro, Mexico metal closures manufacturing facilities and the Culiacan, Mexico plastic container manufacturing facility, as well as the consolidation of certain administrative functions of the acquired businesses. All of these facilities have ceased manufacturing operations. During the first quarter of 2004, we made cash payments totaling $2.6 million related to these plans. At March 31, 2004, these reserves had an aggregate balance of $1.7 million. All cash payments related to these plans are expected in 2004.
During 2003, we approved and announced to employees plans to exit our Norwalk, Connecticut and Anaheim, California plastic container manufacturing facilities and our Queretaro, Mexico metal closures manufacturing facility, as well as to consolidate certain administrative functions of the closures business. These decisions resulted in a charge to earnings of $9.0 million ($1.2 million for the metal food container business and $7.8 million for the plastic container business) in 2003, which included $5.3 million for the non-cash write-down in carrying value of assets. During the first quarter of 2004, additional rationalization charges of $0.6 million were recorded related to these plans. Additional rationalization charges of approximately $0.1 million are expected in the second quarter of 2004, bringing the total expected charges related to these plans to an aggregate of $0.7 million in 2004. During the first quarter of 2004, we made cash payments totaling $0.8 million related to these plans. At March 31, 2004, these reserves had an aggregate balance of $1.3 million. The timing of certain cash payments related to these reserves is dependent upon the expiration of a lease obligation. Therefore, cash payments related to these reserves are expected through 2010.
Under our rationalization and acquisition plans, we made cash payments of $3.4 million and $0.1 million, respectively, for the three months ended March 31, 2004 and 2003. Additional cash spending is expected during 2004 under our Benton Harbor, Fairfield and 2003 Rationalization plans and our 2003 Acquisition plans.
You should also read Note 3 to our Condensed Consolidated Financial Statements for the three months ended March 31, 2004 included elsewhere in this Quarterly Report.
NEW ACCOUNTING PRONOUNCEMENTS
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities," which expands upon existing accounting guidance on consolidation. A variable interest entity either does not have equity investors with voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN No. 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or is entitled to receive a majority of the entity's residual returns. The provisions of FIN No. 46 were effective for us on March 31, 2004. The adoption of FIN No. 46 did not effect our financial position or results of operations.
In January 2004, the FASB issued FSP No. 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." Specific authoritative guidance on the accounting for the federal subsidy is pending, and therefore we have elected to defer accounting for the effects of the Act as permitted by FSP No. 106-1. As a result, in accordance with FSP No. 106-1, our accumulated other postretirement benefit obligation and net periodic other postretirement benefit costs do not reflect the effect of the Act on the plans. Specific authoritative guidance, when issued, could require us to change previously reported information.
Market risks relating to our operations result primarily from changes in interest rates. In the normal course of business, we also have limited foreign currency risk associated with our operations in Canada and Mexico and risk related to commodity price changes for items such as natural gas. We employ established policies and procedures to manage our exposure to these risks. Interest rate, foreign currency and commodity pricing transactions are used only to the extent considered necessary to meet our objectives. We do not utilize derivative financial instruments for trading or other speculative purposes.
Information regarding our interest rate risk, foreign currency exchange rate risk and commodity pricing risk has been disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003. Since such filing, there has not been a material change to our interest rate risk, foreign currency rate risk or commodity pricing risk or to our policies and procedures to manage our exposure to these risks. You should also read Note 7 to our Condensed Consolidated Financial Statements for the three months ended March 31, 2004 included elsewhere in this Quarterly Report.
We carried out an evaluation, under the supervision and with the participation of management, including our Co-Chief Executive Officers and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, as of the end of the period covered by this Quarterly Report our Co-Chief Executive Officers and Chief Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be disclosed in this Quarterly Report has been made known to them in a timely fashion.
There were no changes in our internal controls over financial reporting during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, these internal controls.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
-------------- -----------
10 Employment agreement, dated April 12, 2004, between Silgan
Holdings Inc. and Anthony J. Allott.
12 Ratio of Earnings to Fixed Charges for the three months
ended March 31, 2004 and 2003.
31.1 Certification by the Co-Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act.
31.2 Certification by the Co-Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act.
31.3 Certification by the Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act.
32.1 Certification by the Co-Chief Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act.
32.2 Certification by the Co-Chief Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act.
32.3 Certification by the Chief Financial Officer pursuant
|
to Section 906 of the Sarbanes-Oxley Act.
(b) Reports on Form 8-K
1. On February 4, 2004, we filed a Current Report on Form 8-K related to our announcement of our results of operations for the full year and quarterly period ended December 31, 2003.
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 10, 2004 /s/Anthony J. Allott
--------------------------------
Anthony J. Allott
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Dated: May 10, 2004 /s/Nancy Merola
--------------------------------
Nancy Merola
Vice President and Controller
(Chief Accounting Officer)
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EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
----------- -------
10 Employment agreement, dated April 12, 2004, between Silgan
Holdings Inc. and Anthony J. Allott.
12 Ratio of Earnings to Fixed Charges for the three months
ended March 31, 2004 and 2003.
31.1 Certification by the Co-Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act.
31.2 Certification by the Co-Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act.
31.3 Certification by the Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act.
32.1 Certification by the Co-Chief Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act.
32.2 Certification by the Co-Chief Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act.
32.3 Certification by the Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act.
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Exhibit 10
SILGAN HOLDINGS INC.
4 Landmark Square
Suite 400
Stamford, CT 06901
Telephone: (203) 975-7110
Fax: (203) 975-7902
April 12, 2004
Mr. Anthony J. Allott
2 Marc Lane
Westport, CT 06880
Dear Tony:
This letter sets forth the terms of your continued employment with Silgan Holdings Inc. and replaces in its entirety the letter to you dated April 10, 2002.
You will continue to be employed on a full-time at will basis by Silgan Holdings Inc., serving as its Executive Vice President and Chief Financial Officer and reporting to the Co-Chief Executive Officers of Silgan Holdings Inc. Additionally, you will continue to serve as an officer of subsidiaries of Silgan Holdings Inc. as directed.
While you are employed by Silgan Holdings Inc., as compensation for your services, Silgan Holdings Inc. will pay you a salary, which for 2004 shall be at an annual rate of $496,689. Your salary shall be payable to you in accordance with the prevailing payroll practices (including the withholding of taxes) of Silgan Holdings Inc. Your annual salary shall be increased each year, beginning January 1, 2005, by three percent (3%) or such higher amount as shall be approved by the Compensation Committee of the Board of Directors of Silgan Holdings Inc. While you are employed by Silgan Holdings Inc., you shall also be eligible to receive an annual bonus for each year, payable in the following year in accordance with Silgan Holdings Inc.'s practices (including the withholding of taxes), in an amount up to a maximum of thirty percent (30%) of your annual salary for that year. Your bonus for any year shall be payable to you on the same basis that annual bonuses are payable to the Co-Chief Executive Officers of Silgan Holdings Inc. for such year under the Silgan Holdings Inc. Senior Executive Performance Plan.
During your employment with Silgan Holdings Inc., you will be entitled to
(i) receive health and welfare benefits that are made available generally to
employees of Silgan Holdings Inc., with the full cost for such benefits to be
borne by you, and (ii) to participate in the 401(K) savings plan and
supplemental savings plan that other employees of Silgan Holdings Inc.
participate in, except that you will not be entitled to any matching
contributions in respect of your contributions to such 401(K) savings plan or
supplemental savings plan. The health and welfare benefits that are made
available
Mr. Anthony J. Allott 2 April 12, 2004
generally to employees of Silgan Holdings Inc. currently consist of a comprehensive medical plan, a long-term disability plan and a supplemental life plan. You will also be entitled to four weeks paid vacation, subject to the policies of Silgan Holdings Inc.
Other than as set forth above, you shall not be entitled to participate in any other benefit plans of, or receive any other benefits from, Silgan Holdings Inc. or any of its subsidiaries, including, without limitation, under any pension plan, except that you shall be entitled to also participate in and receive benefits under any stock option, restricted stock or other stock based compensation plan in which other officers of Silgan Holdings Inc. participates.
In the event that your employment with Silgan Holdings Inc. is terminated without cause by Silgan Holdings Inc., you will be entitled to receive a lump sum severance payment in an amount equal to the sum of (i) your annual salary at such time plus (ii) your annual bonus, calculated at thirty percent (30%) of your annual salary at such time.
Please acknowledge your agreement with the foregoing by signing a copy of this letter below.
Very truly yours,
SILGAN HOLDINGS INC.
By: /s/ D. Greg Horrigan -------------------------------- D. Greg Horrigan President and Co-Chief Executive Officer |
Acknowledged and agreed:
/s/ Anthony J. Allott --------------------- Anthony J. Allott |
Exhibit 12
SILGAN HOLDINGS INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
The following table sets forth Silgan Holdings Inc.'s computation of its ratio of earnings to fixed charges for the three months ended March 31:
2004 2003
---- ----
(Dollars in thousands)
Earnings before fixed charges:
Income before income taxes and
equity in losses of affiliate .......... $18,322 $ 7,232
Interest and other debt expense ............ 15,222 18,789
Interest portion of rental expense ......... 199 195
------- -------
Earnings before fixed charges .............. $33,743 $26,216
======= =======
Fixed charges:
Interest and other debt expense ............ $15,222 $18,789
Interest portion of rental expense ......... 199 195
Capitalized interest ....................... 103 575
------- -------
Total fixed charges ........................ $15,524 $19,559
======= =======
Ratio of earnings to fixed charges ................ 2.17 1.34
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Exhibit 31.1
CERTIFICATION BY THE CO-CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, R. Philip Silver, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2004 of Silgan Holdings Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 10, 2004
/s/ R. Philip Silver
--------------------------
Chairman of the Board and
Co-Chief Executive Officer
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Exhibit 31.2
CERTIFICATION BY THE CO-CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, D. Greg Horrigan, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2004 of Silgan Holdings Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 10, 2004
/s/ D. Greg Horrigan
--------------------------
President and
Co-Chief Executive Officer
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Exhibit 31.3
CERTIFICATION BY THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Anthony J. Allott, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2004 of Silgan Holdings Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 10, 2004
/s/ Anthony J. Allott
----------------------------
Anthony J. Allott
Executive Vice President and
Chief Financial Officer
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Exhibit 32.1
CERTIFICATION BY THE CO-CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
In connection with the Quarterly Report of Silgan Holdings Inc. (the "Company") on Form 10-Q for the period ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Quarterly Report"), I, R. Philip Silver, Co-Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ R. Philip Silver -------------------- R. Philip Silver Chairman of the Board and Co-Chief Executive Officer May 10, 2004 |
A signed original of this written statement required by Section 906 has been provided to Silgan Holdings Inc. and will be retained by Silgan Holdings Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION BY THE CO-CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
In connection with the Quarterly Report of Silgan Holdings Inc. (the "Company") on Form 10-Q for the period ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Quarterly Report"), I, D. Greg Horrigan, Co-Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ D. Greg Horrigan -------------------- D. Greg Horrigan President and Co-Chief Executive Officer May 10, 2004 |
A signed original of this written statement required by Section 906 has been provided to Silgan Holdings Inc. and will be retained by Silgan Holdings Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.3
CERTIFICATION BY THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
In connection with the Quarterly Report of Silgan Holdings Inc. (the "Company")
on Form 10-Q for the period ended March 31, 2004 as filed with the Securities
and Exchange Commission on the date hereof (the "Quarterly Report"), I, Anthony
J. Allott, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to my knowledge:
(1) The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Anthony J. Allott --------------------- Anthony J. Allott Executive Vice President and Chief Financial Officer May 10, 2004 |
A signed original of this written statement required by Section 906 has been provided to Silgan Holdings Inc. and will be retained by Silgan Holdings Inc. and furnished to the Securities and Exchange Commission or its staff upon request.