Third Quarter 2017
Highlights
- Net income per share increased 14
percent to $0.65
- Adjusted net income per share increased
8.2 percent to $0.66
- Integration of Dispensing Systems
continues successfully
Silgan Holdings Inc. (Nasdaq:SLGN), a leading supplier of rigid
packaging for consumer goods products, today reported third quarter
2017 net income of $72.4 million, or $0.65 per diluted share, as
compared to third quarter 2016 net income of $69.8 million, or
$0.57 per diluted share.
“We reported adjusted net income per diluted share of $0.66 for
the third quarter of 2017, an increase of 8 percent over the prior
year period,” said Tony Allott, President and CEO. “We continue to
be very pleased with the results of the recently acquired
Dispensing Systems operations and its progress toward achieving the
expected synergies. Our plastic container business continues to
benefit from our footprint optimization program and to deliver
results in line with expectations,” continued Mr. Allott. “Our
metal container business experienced volume declines as compared to
the prior year primarily as a result of lower pack volumes which
were unfavorably impacted by inclement weather in the western U.S.
growing regions and lower soup volumes. Our closures business was
negatively impacted by cooler weather conditions throughout the
summer which resulted in lower single-serve beverage volumes as
compared to record volumes in the prior year period. Additionally,
we were negatively impacted by hurricanes in the quarter as each of
our businesses experienced temporary plant shutdowns and logistical
disruptions. Based upon our performance to date, we are maintaining
our guidance and narrowing the range for our full year 2017
earnings estimate of adjusted net income per diluted share to $1.62
to $1.67,” concluded Mr. Allott.
Adjusted net income per diluted share was $0.66 for the third
quarter of 2017, after adjustments increasing net income per
diluted share by $0.01. Adjusted net income per diluted share was
$0.61 for the third quarter of 2016, after adjustments increasing
net income per diluted share by $0.04. A reconciliation of net
income per diluted share to “adjusted net income per diluted
share,” a Non-GAAP financial measure used by the Company that
adjusts net income per diluted share for certain items, can be
found in Tables A and B at the back of this press release.
All per share amounts for prior periods have been adjusted for
the two-for-one stock split that occurred on May 26, 2017.
Net sales for the third quarter of 2017 were $1.27 billion, an
increase of $127.3 million, or 11.2 percent, as compared to $1.14
billion in 2016. This increase was the result of higher net sales
in the closures business due to the acquisition of the Dispensing
Systems operations in April 2017 as well as in the plastic
container business, partially offset by lower net sales in the
metal container business.
Income from operations for the third quarter of 2017 was $138.6
million, an increase of $16.2 million, or 13.2 percent, as compared
to $122.4 million for the third quarter of 2016, and operating
margin increased to 10.9 percent from 10.7 percent for the same
periods. The increase in income from operations was the result of
higher income from operations in the closures business due to the
benefit from the acquisition of Dispensing Systems as well as in
the plastic container business, partially offset by lower income
from operations in the metal container business. Rationalization
charges were $0.6 million and $7.8 million in the third quarters of
2017 and 2016, respectively.
Interest and other debt expense for the third quarter of 2017
was $30.6 million, an increase of $13.3 million as compared to the
third quarter of 2016. This increase was primarily due to higher
average outstanding borrowings primarily as a result of additional
borrowings for the acquisition of Dispensing Systems in April 2017
and higher weighted average interest rates, including the impact
from increasing long-term fixed rate debt through the issuance in
February 2017 of the 4 3/4% senior notes due 2025 and the 3 1/4%
senior notes due 2025.
Metal Containers
Net sales of the metal container business were $772.4 million
for the third quarter of 2017, a decrease of $25.0 million, or 3.1
percent, as compared to $797.4 million in 2016. This decrease was
primarily the result of lower unit volumes of approximately five
percent and a less favorable mix of products sold, partially offset
by the pass through of higher raw material costs and the impact of
favorable foreign currency translation. The decrease in unit
volumes was primarily due to a less favorable fruit and tomato pack
as a result of poor weather conditions on the west coast of the
United States and certain customer market activities that resulted
in lower soup volumes in the quarter.
Income from operations of the metal container business in the
third quarter of 2017 decreased $5.8 million to $92.2 million as
compared to $98.0 million in 2016, and operating margin decreased
to 11.9 percent from 12.3 percent over the same periods. The
decrease in income from operations was primarily attributable to
lower unit volumes, a less favorable mix of products sold, the
unfavorable impact from the contractual pass through to customers
of indexed deflation, higher depreciation expense and foreign
currency transaction losses in the current year quarter. These
decreases were partially offset by lower rationalization charges,
which were $0.4 million and $4.3 million in the third quarters of
2017 and 2016, respectively.
Closures
Net sales of the closures business were $357.3 million in the
third quarter of 2017, an increase of $145.4 million, or 68.6
percent, as compared to $211.9 million in the third quarter of
2016. This increase was primarily the result of the inclusion of
the recently acquired Dispensing Systems operations, the pass
through of higher raw material costs and the impact of favorable
foreign currency translation, partially offset by lower unit
volumes of approximately seven percent in the legacy closures
operations principally as a result of a decline in single-serve
beverages due to cooler weather conditions in major markets served
as compared to record volumes in the third quarter of 2016.
Income from operations of the closures business for the third
quarter of 2017 increased $16.9 million to $45.3 million as
compared to $28.4 million in 2016, while operating margin decreased
to 12.7 percent from 13.4 percent over the same periods. The
increase in income from operations was primarily due to the
acquisition of Dispensing Systems, partially offset by lower unit
volumes in the legacy closures operations.
Plastic Containers
Net sales of the plastic container business were $137.2 million
in the third quarter of 2017, an increase of $6.9 million, or 5.3
percent, as compared to $130.3 million in the third quarter of
2016. This increase was principally due to the pass through of
higher raw material costs, higher volumes of approximately three
percent and the impact of favorable foreign currency
translation.
Income from operations of the plastic container business for the
third quarter of 2017 was $6.5 million, an increase of $5.7 million
as compared to $0.8 million in 2016, and operating margin increased
to 4.7 percent from 0.6 percent over the same periods. The increase
in income from operations was primarily attributable to lower
manufacturing costs, lower rationalization charges and higher
volumes, partially offset by the unfavorable impact from the lagged
pass through to customers of higher resin costs and higher
depreciation expense. Rationalization charges were $0.1 million and
$3.5 million in the third quarters of 2017 and 2016,
respectively.
Nine Months
Net income for the first nine months of 2017 was $123.5 million,
or $1.11 per diluted share, as compared to net income for the first
nine months of 2016 of $129.7 million, or $1.07 per diluted share.
Adjusted net income per diluted share for the first nine months of
2017 was $1.32 versus $1.14 in the prior year period, after
adjustments increasing net income per diluted share by $0.21 for
the first nine months of 2017 and adjustments increasing net income
per diluted share by $0.07 for the first nine months of 2016.
Net sales for the first nine months of 2017 increased $287.1
million, or 10.2 percent, to $3.09 billion as compared to $2.81
billion for the first nine months of 2016. This increase was
primarily a result of the acquisition of Dispensing Systems, the
pass through of higher raw material costs across all businesses,
higher volumes in the plastic container business and the impact of
favorable foreign currency translation, partially offset by lower
unit volumes in the metal container business and legacy closures
operations and a less favorable mix of products sold in the plastic
container business.
Income from operations for the first nine months of 2017 was
$270.6 million, an increase of $23.1 million, or 9.3 percent, from
the same period in 2016, while operating margin decreased slightly
to 8.7 percent from 8.8 percent for the same periods. The increase
in income from operations was a result of higher income from
operations in each of the businesses. These increases were
primarily due to the acquisition of Dispensing Systems, lower
manufacturing costs in each of the businesses, lower
rationalization charges and higher volumes in the plastic container
business. These increases were partially offset by acquisition
related costs of $23.8 million, lower unit volumes in the metal
container business and legacy closures operations, the unfavorable
impact in the metal container business related to a $3.0 million
charge for the resolution of a past non-commercial legal dispute
and the contractual pass through to customers of indexed deflation,
higher depreciation expense, the unfavorable impact from the lagged
pass through to customers of higher resin costs in the plastic
container business and the unfavorable impact from foreign currency
transaction losses in the current year period. Income from
operations for the first nine months of 2017 included the
unfavorable impact from the write-up of inventory for purchase
accounting related to Dispensing Systems. Rationalization charges
were $4.5 million and $13.9 million in the first nine months of
2017 and 2016, respectively.
Interest and other debt expense before loss on early
extinguishment of debt for the first nine months of 2017 was $80.2
million, an increase of $29.5 million as compared to the same
period in 2016. This increase was primarily due to higher average
outstanding borrowings primarily as a result of additional
borrowings for the acquisition of Dispensing Systems in April 2017
and higher weighted average interest rates, including the impact
from increasing long-term fixed rate debt through the issuance in
February 2017 of the 4 3/4% senior notes due 2025 and the 3 1/4%
senior notes due 2025. Loss on early extinguishment of debt of $7.1
million in 2017 was a result of the prepayment of outstanding U.S.
term loans and Euro term loans under the previous senior secured
credit facility in conjunction with the issuance of the new senior
notes and the partial redemption of the 5% senior notes due 2020 in
April 2017.
The effective tax rate for the first nine months of 2017 was
32.6 percent as compared to 34.1 percent for the first nine months
of 2016. The effective tax rate in 2016 was unfavorably impacted
largely by the cumulative adjustment of a change in tax law in a
certain foreign jurisdiction.
Outlook for 2017
The Company narrowed its estimate of adjusted net income per
diluted share for the full year of 2017, which excludes transaction
related costs attributed to announced acquisitions, rationalization
charges and loss from early extinguishment of debt, to a range of
$1.62 to $1.67 from a range of $1.60 to $1.70. This estimate
compares to adjusted net income per diluted share for the full year
of 2016 of $1.38.
The Company is providing an estimate of adjusted net income per
diluted share for the fourth quarter of 2017, which excludes
transaction related costs attributed to announced acquisitions and
rationalization charges, in the range of $0.30 to $0.35. This
estimate compares to adjusted net income per diluted share of $0.24
in the fourth quarter of 2016.
Conference Call
Silgan Holdings Inc. will hold a conference call to discuss the
Company’s results for the third quarter of 2017 at 11:00 a.m.
eastern time on October 25, 2017. The toll free number for those in
the U.S. and Canada is (888) 713-3592, and the number for
international callers is (719) 325-2204. For those unable to listen
to the live call, a taped rebroadcast will be available through
November 8, 2017. To access the rebroadcast, U.S. and Canadian
callers should dial (888) 203-1112, and international callers
should dial (719) 457-0820. The pass code is 8205546.
Silgan is a leading supplier of rigid packaging for consumer
goods products with annual net sales, on a pro forma basis to
include the Dispensing Systems operations which was acquired on
April 6, 2017, of approximately $4.2 billion in 2016. Silgan
operates 100 manufacturing facilities in North and South America,
Europe and Asia. The Company is a leading supplier of metal
containers in North America and Europe for food and general line
products. The Company is also a leading worldwide supplier of metal
and plastic closures and dispensing systems for food, beverage,
health care, garden, home and beauty products. In addition, the
Company is a leading supplier of plastic containers for
shelf-stable food and personal care products in North America.
Statements included in this press release 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 the Securities Exchange Act of 1934, as
amended. Such forward looking statements are made based upon
management’s expectations and beliefs concerning future events
impacting the Company and therefore involve a number of
uncertainties and risks, including, but not limited to, those
described in the Company’s Annual Report on Form 10-K for 2016 and
other filings with the Securities and Exchange Commission.
Therefore, the actual results of operations or financial condition
of the Company could differ materially from those expressed or
implied in such forward looking statements.
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (UNAUDITED)
For the quarter and nine months ended
September 30,
(Dollars in millions, except per share
amounts)
Third
Quarter
Nine
Months
2017
2016
2017
2016
Net sales $1,266.9 $1,139.6 $3,094.1 $2,807.0 Cost of
goods sold
1,054.3 957.7
2,591.8 2,383.5 Gross profit 212.6
181.9 502.3 423.5 Selling, general and administrative
expenses 73.4 51.7 227.2 162.1 Rationalization charges
0.6 7.8 4.5
13.9 Income from operations 138.6 122.4 270.6
247.5 Interest and other debt expense before loss on early
extinguishment of debt 30.6 17.3 80.2 50.7 Loss on early
extinguishment of debt
- -
7.1 - Interest and other debt
expense
30.6 17.3 87.3
50.7 Income before income taxes 108.0 105.1
183.3 196.8 Provision for income taxes
35.6
35.3 59.8 67.1 Net
income
$ 72.4 $ 69.8 $ 123.5
$ 129.7 Earnings per share: (1) Basic net
income per share $0.66 $0.58 $1.12 $1.07 Diluted net income per
share $0.65 $0.57 $1.11 $1.07 Cash dividends per common
share (1) $0.09 $0.09 $0.27 $0.26 Weighted average shares
(000’s): (1) Basic 110,391 120,891 110,327 120,934 Diluted 111,427
121,658 111,323 121,675 (1) Per share and share amounts have
been adjusted for the two-for-one stock split that occurred on May
26, 2017.
SILGAN HOLDINGS INC.
CONSOLIDATED SUPPLEMENTAL FINANCIAL
DATA (UNAUDITED)
For the quarter and nine months ended
September 30,
(Dollars in millions)
Third
Quarter
Nine
Months
2017
2016
2017
2016
Net sales: Metal containers $ 772.4 $ 797.4 $1,768.3 $1,780.4
Closures 357.3 211.9 904.1 614.6 Plastic containers
137.2 130.3 421.7
412.0 Consolidated
$1,266.9
$1,139.6 $3,094.1 $2,807.0
Income from operations: Metal containers (a) $ 92.2 $ 98.0 $
185.5 $ 181.5 Closures (b) 45.3 28.4 103.0 78.2 Plastic containers
(c) 6.5 0.8 20.0 1.9 Corporate (d)
(5.4)
(4.8)
(37.9)
(14.1)
Consolidated
$ 138.6 $ 122.4 $
270.6 $ 247.5
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Dollars in millions)
Sept. 30, Sept.
30, Dec. 31,
2017
2016
2016
Assets: Cash and cash equivalents $ 199.2 $ 93.6 $ 24.7 Trade
accounts receivable, net 702.3 515.6 288.2 Inventories 704.4 638.1
603.0 Other current assets 62.5 51.1 46.3 Property, plant and
equipment, net 1,472.3 1,171.2 1,157.0 Other assets, net
1,880.4 1,031.9 1,030.2
Total assets
$5,021.1 $3,501.5
$3,149.4 Liabilities and stockholders’ equity:
Current liabilities, excluding debt $ 678.9 $ 512.1 $ 644.7 Current
and long-term debt 3,106.2 1,818.4 1,561.6 Other liabilities 612.9
419.3 473.7 Stockholders’ equity
623.1
751.7 469.4 Total liabilities and
stockholders’ equity
$5,021.1 $3,501.5
$3,149.4 (a) Includes rationalization charges
of $0.4 million and $4.3 million for the three months ended
September 30, 2017 and 2016, respectively, and $3.3 million and
$8.3 million for the nine months ended September 30, 2017 and 2016,
respectively. Includes a $3.0 million charge for the nine months
ended September 30, 2017 related to the resolution of a past
non-commercial legal dispute. (b) Includes rationalization charges
of $0.1 million for the three months ended September 30, 2017 and
$0.5 million for each of the nine months ended September 30, 2017
and 2016. (c) Includes rationalization charges of $0.1 million and
$3.5 million for the three months ended September 30, 2017 and
2016, respectively, and $0.7 million and $5.1 million for the nine
months ended September 30, 2017 and 2016, respectively. (d)
Includes costs attributed to announced acquisitions of $0.8 million
and $23.8 million for the three and nine months ended September 30,
2017, respectively.
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
For the nine months ended September
30,
(Dollars in millions)
2017
2016
Cash flows provided by (used in) operating activities: Net income $
123.5 $ 129.7 Adjustments to reconcile net income to net cash
provided by (used in) operating activities: Depreciation and
amortization 129.7 110.3 Rationalization charges 4.5 13.9 Loss on
early extinguishment of debt 7.1 - Other changes that provided
(used) cash, net of effects from acquisition: Trade accounts
receivable, net (285.9) (231.7) Inventories (2.9) (6.5) Trade
accounts payable and other changes, net
19.6
(27.2) Net cash used in operating activities
(4.4)
(11.5) Cash flows provided
by (used in) investing activities: Purchase of business, net of
cash acquired (1,028.7) - Capital expenditures (124.2) (151.5)
Proceeds from asset sales
0.5 8.9 Net
cash used in investing activities (
1,152.4)
(142.6) Cash flows provided by (used in)
financing activities: Dividends paid on common stock (30.4) (31.3)
Changes in outstanding checks – principally vendors (78.9) (101.8)
Net borrowings and other financing activities
1,440.6
280.9 Net cash provided by financing activities
1,331.3 147.8 Cash and cash
equivalents: Net increase (decrease) 174.5 (6.3) Balance at
beginning of year
24.7 99.9 Balance at
end of period
$ 199.2 $ 93.6
SILGAN HOLDINGS INC.
RECONCILIATION OF ADJUSTED NET INCOME
PER DILUTED SHARE (1)(2)
(UNAUDITED)
For the quarter and nine months ended
September 30,
Table A
Third
Quarter
Nine
Months
2017
2016
2017
2016
Net income per diluted share as reported $0.65 $0.57 $1.11
$1.07 Adjustments: Rationalization charges - 0.04 0.03 0.07
Loss on early extinguishment of debt - - 0.04 - Costs attributed to
announced acquisitions
0.01 -
0.14 - Adjusted net income per diluted
share
$0.66 $0.61 $1.32
$1.14
SILGAN HOLDINGS INC.
RECONCILIATION OF ADJUSTED NET INCOME
PER DILUTED SHARE (1)(2)
(UNAUDITED)
For the quarter and year ended,
Table B
Fourth
Quarter
Year
Ended
December
31,
December
31,
Estimated
Actual
Estimated
Actual
Low High Low High
2017 2017 2016
2017 2017 2016 Net
income per diluted share as estimated for 2017 and as reported for
2016 $0.30 $0.35 $0.20 $1.41 $1.46 $1.27 Adjustments:
Rationalization charges - - 0.03 0.03 0.03 0.10 Loss on early
extinguishment of debt - - - 0.04 0.04 - Costs attributed to
announced acquisitions
- -
0.01 0.14 0.14
0.01 Adjusted net income per diluted share as
estimated for 2017 and presented for 2016
$0.30
$0.35 $0.24 $1.62
$1.67 $1.38 (1) The Company has
presented adjusted net income per diluted share for the periods
covered by this press release, which measure is a Non-GAAP
financial measure. The Company’s management believes it is useful
to exclude rationalization charges, costs attributed to announced
acquisitions and the loss on early extinguishment of debt from its
net income per diluted share as calculated under U.S. generally
accepted accounting principles because such Non-GAAP financial
measure allows for a more appropriate evaluation of its operating
results. While rationalization costs are incurred on a regular
basis, management views these costs more as an investment to
generate savings rather than period costs. Costs attributed to
announced acquisitions consist of third party fees and expenses
that are viewed by management as part of the acquisition and not
indicative of the ongoing cost structure of the Company. Such
Non-GAAP financial measure is not in accordance with U.S. generally
accepted accounting principles and should not be considered in
isolation but should be read in conjunction with the unaudited
condensed consolidated statements of income and the other
information presented herein. Additionally, such Non-GAAP financial
measure should not be considered a substitute for net income per
diluted share as calculated under U.S. generally accepted
accounting principles and may not be comparable to similarly titled
measures of other companies. (2) Per share amounts have been
adjusted for the two-for-one stock split that occurred on May 26,
2017.
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version on businesswire.com: http://www.businesswire.com/news/home/20171025005238/en/
Silgan Holdings Inc.Robert B. Lewis, 203-406-3160
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