Third Quarter 2015
Highlights
- Net income per share of $1.16
- Adjusted net income per share of
$1.26
- Metal container volume growth of 8
percent
- Footprint optimization progress
continued, negatively impacting profit
- Announced closure of two plastic
container facilities
Silgan Holdings Inc. (Nasdaq:SLGN), a leading supplier of rigid
packaging for shelf-stable food and other consumer goods products,
today reported third quarter 2015 net income of $70.3 million, or
$1.16 per diluted share, as compared to third quarter 2014 net
income of $83.3 million, or $1.31 per diluted share.
“Logistical challenges and incremental costs related to our
footprint optimization programs acutely impacted third quarter
results as we reported adjusted net income per diluted share of
$1.26,” said Tony Allott, President and CEO. “Our metal container
business continued to experience volume growth in the quarter which
continued to strain our existing infrastructure and increased our
freight and logistics costs. Our closures business also saw volume
growth in the quarter and continued to perform well operationally.
Our plastic container business continued a major plant optimization
program, affecting almost all of its production locations, and
significantly increased certain costs to minimize disruption to
customers. While we remain fully committed to this program, it is
clear that in the plastic container business it will be more
challenging and take longer than we had originally projected,”
continued Mr. Allott. “Based on our year-to-date performance and
our outlook for the remainder of the year which assumes ongoing
incremental spending in the plastic container business as well as
the impact of a truncated fruit and vegetable pack in the U.S., we
are lowering our full year 2015 earnings estimate of adjusted net
income per diluted share to a range of $2.88 to $2.98,” concluded
Mr. Allott.
Adjusted net income per diluted share was $1.26 for the third
quarter of 2015, after adjustments increasing net income per
diluted share by $0.10. Adjusted net income per diluted share was
$1.33 for the third quarter of 2014, after adjustments increasing
net income per diluted share by $0.02. 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.
Net sales for the third quarter of 2015 were $1.20 billion, a
decrease of $24.9 million, or 2.0 percent, as compared to $1.23
billion in 2014. This decrease was the result of a decrease in net
sales in the closures and plastic container businesses due partly
to the impact of unfavorable foreign currency translation,
partially offset by an increase in net sales in the metal container
business.
Income from operations for the third quarter of 2015 was $121.9
million, a decrease of $25.8 million, or 17.5 percent, as compared
to $147.7 million for the third quarter of 2014, and operating
margin decreased to 10.1 percent from 12.0 percent for the same
periods. The decrease in income from operations was the result of a
decrease in each business due primarily to costs associated with
footprint optimization plans, higher rationalization charges and
unfavorable foreign currency translation. Rationalization charges
were $9.1 million and $2.5 million in the third quarters of 2015
and 2014, respectively.
Interest and other debt expense for the third quarter of 2015
was $17.1 million, a decrease of $2.2 million as compared to the
third quarter of 2014, due primarily to lower weighted average
interest rates and the impact from favorable foreign currency
translation.
The effective tax rate was 32.9 percent and 35.1 percent for the
third quarters of 2015 and 2014, respectively. The effective tax
rate in 2015 benefitted from higher income in lower tax
jurisdictions.
Metal Containers
Net sales of the metal container business were $845.4 million
for the third quarter of 2015, an increase of $17.7 million, or 2.1
percent, as compared to $827.7 million in 2014. This increase was
primarily a result of higher unit volumes, partially offset by the
result of unfavorable foreign currency translation. Unit volumes
increased approximately 8 percent due principally to volumes of
smaller size cans associated with the recent acquisition of the Van
Can operations and for pet food products.
Income from operations of the metal container business in the
third quarter of 2015 decreased $6.2 million to $106.0 million as
compared to $112.2 million in 2014, and operating margin decreased
to 12.5 percent as compared to 13.6 percent in 2014. The decrease
in income from operations was primarily attributable to higher
manufacturing costs due largely to logistical challenges from
changes in customer demand patterns, which was further exacerbated
as a result of higher volumes in the third quarter of 2015, and a
less favorable mix of products sold including volumes associated
with the less efficient Van Can operations, partially offset by
higher unit volumes.
Closures
Net sales of the closures business were $215.7 million in the
third quarter of 2015, a decrease of $25.3 million, or 10.5
percent, as compared to $241.0 million in the third quarter of
2014. This decrease was primarily the result of the impact of
unfavorable foreign currency translation, the pass through of lower
resin costs and the cessation of operations in Venezuela at the end
of 2014, partially offset by an increase in unit volumes of
approximately 1 percent.
Income from operations of the closures business for the third
quarter of 2015 decreased $0.6 million to $27.1 million as compared
to $27.7 million in 2014, while operating margin increased to 12.6
percent from 11.5 percent over the same periods. The decrease in
income from operations was primarily due to the impact of
unfavorable foreign currency translation, partially offset by
better operating performance as a result of the benefits of the
Portola Packaging integration and plant optimization programs, the
favorable impact from the lagged pass through of decreases in resin
costs in the current year quarter as compared to the unfavorable
impact from resin in the prior year quarter and higher unit
volumes.
Plastic Containers
Net sales of the plastic container business were $142.4 million
in the third quarter of 2015, a decrease of $17.3 million, or 10.8
percent, as compared to $159.7 million in the third quarter of
2014. This decrease was principally due to the pass through of
lower raw material costs, the impact of unfavorable foreign
currency translation, lower volumes of approximately 1 percent and
the unfavorable financial impact from recent longer-term customer
contract renewals.
Loss from operations of the plastic container business for the
third quarter of 2015 was $7.3 million as compared to income from
operations of $13.1 million in 2014. This decrease was primarily
attributable to higher rationalization charges, significant costs
and manufacturing inefficiencies associated with the footprint
optimization program, the unfavorable financial impact from recent
longer-term customer contract renewals, a customer reimbursement
for historical project costs in the prior year period, lower
volumes and the impact of unfavorable foreign currency translation,
partially offset by the favorable impact from the lagged pass
through of decreases in resin costs. Rationalization charges in the
third quarter of 2015 were $8.9 million related to the announced
shut down of two Midwest facilities in conjunction with the ongoing
footprint optimization program. Rationalization charges were $1.3
million in the third quarter of 2014.
Nine Months
Net income for the first nine months of 2015 was $145.9 million,
or $2.37 per diluted share, as compared to net income for the first
nine months of 2014 of $158.8 million, or $2.49 per diluted share.
Adjusted net income per diluted share for the first nine months of
2015 was $2.49 versus $2.59 in the prior year period, after
adjustments increasing net income per diluted share by $0.12 for
the first nine months of 2015 and adjustments increasing net income
per diluted share by $0.10 for the first nine months of 2014.
Net sales for the first nine months of 2015 decreased $67.3
million, or 2.2 percent, to $2.93 billion as compared to $3.0
billion for the first nine months of 2014. This decrease was
primarily the result of the unfavorable impact of foreign currency
translation of approximately $115 million, the pass through of
lower raw material costs in the closures and plastic container
businesses, the unfavorable financial impact from recent
longer-term customer contract renewals, lower volumes in the
plastic container business and the cessation of operations in
Venezuela at the end of 2014. These decreases were partially offset
by the impact of higher volumes in the metal container and closures
businesses.
Income from operations for the first nine months of 2015 was
$267.3 million, a decrease of $34.4 million, or 11.4 percent, from
the same period in 2014. This decrease was primarily a result of
higher manufacturing and logistics costs in the metal container
business, the unfavorable impact from incremental footprint
optimization spending and recent longer-term customer contract
renewals, the impact of unfavorable foreign currency translation
and higher rationalization charges. The decrease in income from
operations for the first nine months of 2015 was also due to a less
favorable mix of products sold in the metal container business,
lower volumes in the plastic container business, a customer
reimbursement for historical project costs in the prior year period
and the impact from a larger inventory reduction in the current
year period in the closures business. These decreases were
partially offset by an increase in volumes in the metal container
and closures businesses, the favorable impact from the lagged pass
through of lower resin costs in the closures and plastic container
businesses, operational losses in Venezuela for the nine months
ending September 30, 2014 of $2.6 million and foreign currency
transactional losses incurred in the prior year period.
Rationalization charges were $10.8 million and $5.0 million in the
first nine months of 2015 and 2014, respectively.
Interest and other debt expense before loss on early
extinguishment of debt for the first nine months of 2015 was $50.4
million, a decrease of $6.5 million as compared to the first nine
months of 2014. This decrease was primarily due to lower weighted
average interest rates and the impact from favorable foreign
currency translation. Loss on early extinguishment of debt of $1.5
million in the first nine months of 2014 was a result of the
refinancing of the senior secured credit facility in January
2014.
The effective tax rate for the first nine months of 2015 was
32.8 percent as compared to 34.8 percent for the first nine months
of 2014. The effective tax rate in 2015 benefitted from higher
income in lower tax jurisdictions.
Outlook for 2015
The Company lowered its estimate of adjusted net income per
diluted share for the full year of 2015, which excludes
rationalization charges, to a range of $2.88 to $2.98 from the
previous range of $3.10 to $3.30. This estimate compares to
adjusted net income per diluted share for the full year of 2014 of
$3.17.
The Company is providing an estimate of adjusted net income per
diluted share for the fourth quarter of 2015, which excludes
rationalization charges, in the range of $0.38 to $0.48, which
includes continued incremental spending associated with the
footprint optimization programs. This estimate compares to record
adjusted net income per diluted share of $0.58 in the fourth
quarter of 2014.
Conference Call
Silgan Holdings Inc. will hold a conference call to discuss the
Company’s results for the third quarter of 2015 at 11:00 a.m.
eastern time on October 21, 2015. The toll free number for those in
the U.S. and Canada is (888) 500-6973, and the number for
international callers is (719) 457-2734. For those unable to listen
to the live call, a taped rebroadcast will be available through
November 4, 2015. 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 8076375.
Silgan is a leading supplier of rigid packaging for shelf-stable
food and other consumer goods products with annual net sales of
approximately $3.9 billion in 2014. Silgan operates 88
manufacturing facilities in North and South America, Europe and
Asia. Silgan is a leading supplier of metal containers in North
America and Europe and a leading worldwide supplier of metal,
composite and plastic closures for food and beverage products. In
addition, Silgan 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 2014 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
2015
2014
2015
2014
Net sales $
1,203.5
$
1,228.4
$
2,934.3
$
3,001.6
Cost of goods sold
1,018.4
1,022.8 2,493.3
2,524.3 Gross profit 185.1 205.6
441.0 477.3 Selling, general and administrative expenses
54.1 55.4 162.9 170.6 Rationalization charges
9.1 2.5
10.8 5.0
Income from operations 121.9 147.7 267.3 301.7
Interest and other debt expense before
loss on early extinguishment of debt
17.1 19.3 50.4 56.9 Loss on early extinguishment of debt
- -
- 1.5
Interest and other debt expense 17.1 19.3 50.4 58.4 Income
before income taxes 104.8 128.4 216.9 243.3 Provision for
income taxes
34.5
45.1 71.0
84.5 Net income
$
70.3 $ 83.3
$ 145.9 $
158.8 Earnings per share: Basic net
income per share $ 1.16 $ 1.31 $ 2.38 $ 2.50 Diluted net income per
share $ 1.16 $ 1.31 $ 2.37 $ 2.49 Cash dividends per common
share $ 0.16 $ 0.15 $ 0.48 $ 0.45 Weighted average shares
(000’s): Basic 60,417 63,448 61,222 63,480 Diluted 60,696 63,714
61,493 63,827
SILGAN HOLDINGS INC.
CONSOLIDATED SUPPLEMENTAL FINANCIAL
DATA (UNAUDITED)
For the quarter and nine months ended
September 30,
(Dollars in millions)
Third
Quarter
Nine
Months
2015
2014
2015
2014
Net sales: Metal containers $ 845.4 $ 827.7 $ 1,858.0 $ 1,814.8
Closures 215.7 241.0 620.9 687.0 Plastic containers
142.4 159.7
455.4 499.8
Consolidated
$ 1,203.5
$ 1,228.4 $
2,934.3 $ 3,001.6
Income from operations: Metal containers $
106.0 $ 112.2 $ 195.0 $ 203.6 Closures (a) 27.1 27.7 73.2 70.6
Plastic containers (b) (7.3 ) 13.1 11.3 38.9 Corporate
(3.9 )
(5.3 )
(12.2 )
(11.4 ) Consolidated
$ 121.9 $
147.7 $ 267.3
$ 301.7
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Dollars in millions)
Sept. 30, Sept. 30, Dec. 31,
2015
2014
2014
Assets: Cash and cash equivalents $ 104.2 $ 145.9 $ 222.6 Trade
accounts receivable, net 623.6 616.3 310.7 Inventories 580.3 588.3
548.8 Other current assets 51.8 56.9 75.7 Property, plant and
equipment, net 1,099.9 1,080.2 1,063.6 Other assets, net
1,054.6 1,142.6
1,082.5 Total assets
$
3,514.4 $ 3,630.2
$ 3,303.9
Liabilities and stockholders’ equity: Current liabilities,
excluding debt $ 492.7 $ 446.2 $ 539.3 Current and long-term debt
1,931.8 1,967.0 1,599.0 Other liabilities 458.0 435.7 455.6
Stockholders’ equity
631.9
781.3 710.0 Total
liabilities and stockholders’ equity
$
3,514.4 $ 3,630.2
$ 3,303.9 (a)
Includes rationalization charges of $0.2 million and $1.2 million
for the three months ended September 30, 2015 and 2014,
respectively, and $1.4 million and $2.7 million for the nine months
ended September 30, 2015 and 2014, respectively. Includes income
from operations in Venezuela of $0.8 million and losses from
operations in Venezuela of $2.6 million for the three and nine
months ended September 30, 2014, respectively. (b) Includes
rationalization charges of $8.9 million and $1.3 million for the
three months ended September 30, 2015 and 2014, respectively, and
$9.4 million and $2.3 million for the nine months ended September
30, 2015 and 2014, respectively.
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
For the nine months ended September
30,
(Dollars in millions)
2015
2014
Cash flows provided by (used in) operating activities: Net
income $ 145.9 $ 158.8
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 109.8 114.2 Rationalization charges
10.8 5.0 Loss on early extinguishment of debt - 1.5 Other changes
that provided (used) cash, net of effects from acquisitions: Trade
accounts receivable, net (325.3 ) (291.8 ) Inventories (43.7 )
(81.6 ) Trade accounts payable and other changes, net
54.3 41.3 Net cash
used in operating activities
(48.2 )
(52.6 ) Cash flows provided by (used in)
investing activities: Purchases of businesses, net of cash acquired
(0.7 ) (17.7 ) Capital expenditures (151.4 ) (94.3 ) Proceeds from
asset sales
0.2 1.2
Net cash used in investing activities
(151.9 )
(110.8 ) Cash
flows provided by (used in) financing activities: Dividends paid on
common stock (29.9 ) (29.0 ) Changes in outstanding checks –
principally vendors (82.8 ) (86.5 ) Shares repurchased under
authorized repurchase program (170.1 ) (24.7 ) Net borrowings and
other financing activities
364.5
289.0 Net cash provided by financing activities
81.7 148.8
Cash and cash equivalents: Net decrease (118.4 ) (14.6 )
Balance at beginning of year
222.6
160.5 Balance at end of period
$ 104.2 $
145.9
SILGAN HOLDINGS INC.
RECONCILIATION OF ADJUSTED NET INCOME
PER DILUTED SHARE (1)
(UNAUDITED)
For the quarter and nine months ended
September 30,
Table A
Third
Quarter
Nine
Months
2015
2014
2015
2014
Net income per diluted share as reported $ 1.16 $ 1.31 $
2.37 $ 2.49 Adjustments: Rationalization charges 0.10 0.03
0.12 0.05 Loss on early extinguishment of debt - - - 0.02 Net
(income) loss from operations in Venezuela
-
(0.01 )
- 0.03 Adjusted net
income per diluted share
$ 1.26
$ 1.33 $
2.49 $ 2.59
SILGAN HOLDINGS INC.
RECONCILIATION OF ADJUSTED NET INCOME
PER DILUTED SHARE (1)
(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
2015
2015
2014
2015
2015
2014
Net income per diluted share as estimated
for 2015 and as reported for 2014
$ 0.35 $ 0.45 $ 0.37 $ 2.73 $ 2.83 $ 2.86 Adjustments:
Rationalization charges 0.03 0.03 0.21 0.15 0.15 0.26 Costs
attributable to announced acquisitions (2) - - - - - - Loss on
early extinguishment of debt - - - - - 0.02 Net loss from
operations in Venezuela
-
- -
- -
0.03
Adjusted net income per diluted share as
estimated for 2015 and presented for 2014
$ 0.38 $
0.48 $ 0.58
$ 2.88 $
2.98 $ 3.17
(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
attributable to announced acquisitions, the loss on early
extinguishment of debt and net results from operations in
Venezuela, including the impact from the remeasurement of net
assets in Venezuela, 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 attributable 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. Due to the political
environment in Venezuela and an increasingly restrictive monetary
policy, the operations in Venezuela were unable to import raw
materials on a regular basis, and as a result the Company has
ceased operations in Venezuela. Therefore, management does not view
the net results from operations in Venezuela to be meaningful or
indicative. 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) Costs
attributable to announced acquisitions have not been estimated for
future periods.
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version on businesswire.com: http://www.businesswire.com/news/home/20151021005212/en/
Silgan Holdings Inc.Robert B. Lewis, 203-406-3160
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