Second Quarter 2016
Highlights
- Net income per share of $0.55
- Adjusted net income per share of
$0.60
- Commercial qualification underway at
new metal container facility
- Closures volume growth of 3
percent
Silgan Holdings Inc. (Nasdaq:SLGN), a leading supplier of rigid
packaging for shelf-stable food and other consumer goods products,
today reported second quarter 2016 net income of $33.3 million, or
$0.55 per diluted share, as compared to second quarter 2015 net
income of $42.2 million, or $0.70 per diluted share.
“We are pleased with our second quarter 2016 results, as we
reported adjusted net income per diluted share of $0.60, at the
high end of our estimate, with each business segment exceeding
expectations,” said Tony Allott, President and CEO. “Our metal
container business benefited from an earlier than expected midwest
vegetable pack in the U.S., though not as early or strong as in the
prior year. In addition, we advanced the qualification process of
the new can manufacturing facility and incurred related start-up
costs in the quarter. Our closures business continued to experience
volume growth due to strong demand for single-serve beverages,
particularly in the U.S.,” continued Mr. Allott. “In our plastic
container business, meeting the needs of our customers is our
primary focus as we continue to make positive strides with our
customer service and operating performance objectives. However, to
ensure continued success with our customers we are continuing to
implement the optimization program on a more measured pace. Based
upon revised estimates of our customers’ pack demand and the
gradual pace of improvement in the plastic container business, we
are revising our full year 2016 earnings estimate of adjusted net
income per diluted share to a range of $2.70 to $2.90,” continued
Mr. Allott.
Adjusted net income per diluted share was $0.60 for the second
quarter of 2016, after adjustments increasing net income per
diluted share by $0.05. Adjusted net income per diluted share was
$0.71 for the second quarter of 2015, after adjustments increasing
net income per diluted share by $0.01. 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 second quarter of 2016 were $874.6 million, a
decrease of $39.6 million, or 4.3 percent, as compared to $914.2
million in 2015. This decrease was the result of lower net sales in
all of our businesses due primarily to the pass through of lower
raw material costs.
Income from operations for the second quarter of 2016 was $67.7
million, a decrease of $10.6 million, or 13.5 percent, as compared
to $78.3 million for the second quarter of 2015, and operating
margin decreased to 7.7 percent from 8.6 percent for the same
periods. The decrease in income from operations was the result of
the anticipated decrease in income from operations in the metal and
plastic container businesses, partially offset by an increase in
income from operations in the closures business. Rationalization
charges were $5.0 million and $1.0 million in the second quarters
of 2016 and 2015, respectively.
The effective tax rates were 34.4 percent and 31.3 percent for
the second quarters of 2016 and 2015, respectively. The effective
tax rate in the second quarter of 2015 benefited from higher income
in lower tax jurisdictions.
Metal Containers
Net sales of the metal container business were $529.6 million
for the second quarter of 2016, a decrease of $24.1 million, or 4.4
percent, as compared to $553.7 million in 2015. This decrease was
primarily the result of the pass through of lower raw material
costs and a decrease in unit volumes of approximately 2 percent,
partially offset by a favorable mix of products sold and the impact
of slightly favorable foreign currency translation. The decrease in
unit volumes was primarily the result of a stronger start to the
U.S. midwest vegetable pack in the prior year quarter and a slower
start to this year’s seasonal vegetable pack in Europe due to cool
and wet conditions.
Income from operations of the metal container business in the
second quarter of 2016 decreased $2.4 million to $45.9 million as
compared to $48.3 million in 2015, while operating margin remained
constant at 8.7 percent over the same periods. The decrease in
income from operations was primarily attributable to
rationalization charges related to the shutdown of the LaPorte,
Indiana manufacturing facility, start-up costs related to the new
can manufacturing facility and lower unit volumes, partially offset
by a favorable mix of products sold and better operating
performance than in the prior year quarter. Rationalization charges
were $4.0 million in the second quarter of 2016.
Closures
Net sales of the closures business were $206.5 million in the
second quarter of 2016, a decrease of $0.6 million, or 0.3 percent,
as compared to $207.1 million in the second quarter of 2015. This
decrease was primarily the result of the pass through of lower raw
material costs, largely offset by an increase in unit volumes of
approximately 3 percent and the impact of slightly favorable
foreign currency translation. The increase in unit volumes was
primarily due to continued strong demand from U.S. beverage
markets.
Income from operations of the closures business for the second
quarter of 2016 increased $0.7 million to $25.3 million as compared
to $24.6 million in 2015, and operating margin increased to 12.3
percent from 11.9 percent over the same periods. The increase in
income from operations was primarily due to higher unit volumes and
strong operating performance, partially offset by the unfavorable
impact from the lagged pass through of increases in resin
costs.
Plastic Containers
Net sales of the plastic container business were $138.5 million
in the second quarter of 2016, a decrease of $14.9 million, or 9.7
percent, as compared to $153.4 million in the second quarter of
2015. This decrease was principally due to lower unit volumes of
approximately 5 percent as a result of the continued rebalancing of
the customer portfolio in conjunction with the footprint
optimization program, the pass through of lower raw material costs
and the impact of slightly unfavorable foreign currency
translation.
Income from operations of the plastic container business for the
second quarter of 2016 was $1.0 million, a decrease of $8.4 million
as compared to $9.4 million in 2015, and operating margin decreased
to 0.7 percent from 6.1 percent over the same periods. The decrease
in income from operations was primarily attributable to higher
incremental costs and inefficiencies incurred to service customers
during the footprint optimization program, lower unit volumes,
start-up costs related to the new manufacturing facilities and the
favorable impact in the prior year period from the lagged pass
through of decreases in resin costs.
Six Months
Net income for the first six months of 2016 was $59.9 million,
or $0.98 per diluted share, as compared to net income for the first
six months of 2015 of $75.5 million, or $1.22 per diluted share.
Adjusted net income per diluted share for the first six months of
2016 was $1.05 versus $1.24 in the prior year period, after
adjustments increasing net income per diluted share by $0.07 for
the first six months of 2016 and adjustments increasing net income
per diluted share by $0.02 for the first six months of 2015.
Net sales for the first six months of 2016 decreased $63.4
million, or 3.7 percent, to $1.67 billion as compared to $1.73
billion for the first six months of 2015. This decrease was
primarily the result of the pass through of lower raw material
costs across all businesses and lower unit volumes and the impact
of unfavorable foreign currency translation in the plastic
container business, partially offset by an increase in unit volumes
in the closures business and a favorable mix of products sold in
the metal container business.
Income from operations for the first six months of 2016 was
$125.1 million, a decrease of $20.3 million, or 14.0 percent, from
the same period in 2015. This decrease was primarily due to higher
manufacturing costs in the metal and plastic container businesses
including start-up costs related to the new manufacturing
facilities, the unfavorable impact from the lagged pass through of
changes in resin costs in the closures and plastic container
businesses as compared to the prior year period, higher
rationalization charges, lower unit volumes in the plastic
container business and foreign currency transaction losses. These
decreases were partially offset by an increase in unit volumes in
the closures business, a favorable mix of products sold in the
metal container business and manufacturing efficiencies in the
closures business. Rationalization charges were $6.1 million and
$1.6 million in the first six months of 2016 and 2015,
respectively.
The effective tax rate for the first six months of 2016 was 34.7
percent as compared to 32.6 percent for the first six months of
2015. The effective tax rate in 2016 was unfavorably impacted by
the cumulative adjustment of a change in tax law in a certain
foreign jurisdiction, partially offset by higher income in more
favorable tax jurisdictions. The effective tax rate in 2015
benefited from higher income in more favorable tax
jurisdictions.
Outlook for 2016
The Company revised its estimate of adjusted net income per
diluted share for the full year of 2016, which excludes
rationalization charges, to a range of $2.70 to $2.90 from the
previous range of $2.80 to $3.00. This estimate reflects current
indications of lower demand from certain U.S. pack customers, a
cool and wet start to the European growing season and a somewhat
more measured pace of equipment relocations associated with the
footprint optimization program in the plastic container business.
This estimate compares to adjusted net income per diluted share for
the full year of 2015 of $2.97.
The Company is providing an estimate of adjusted net income per
diluted share for the third quarter of 2016, which excludes
rationalization charges, in the range of $1.20 to $1.30. As in
prior years, given the uncertainties around the timing of the fruit
and vegetable harvest in the U.S. and the late start of the pack in
Europe, the results of the back half of the year could shift
between the third and fourth quarters. This estimate compares to
adjusted net income per diluted share of $1.26 in the third quarter
of 2015.
Conference Call
Silgan Holdings Inc. will hold a conference call to discuss the
Company’s results for the second quarter of 2016 at 11:00 a.m.
eastern time on July 27, 2016. The toll free number for those in
the U.S. and Canada is (888) 352-6793, and the number for
international callers is (719) 457-2607. For those unable to listen
to the live call, a taped rebroadcast will be available through
August 10, 2016. 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 4156728.
Silgan is a leading supplier of rigid packaging for shelf-stable
food and other consumer goods products with annual net sales of
approximately $3.8 billion in 2015. 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 2015 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 six months ended June
30,
(Dollars in millions, except per share
amounts)
Second
Quarter
Six
Months
2016
2015
2016
2015
Net sales $ 874.6 $ 914.2 $ 1,667.4 $ 1,730.8 Cost of
goods sold
746.9 780.5
1,425.8 1,474.9
Gross profit 127.7 133.7 241.6 255.9 Selling, general and
administrative expenses 55.0 54.4 110.4 108.9
Rationalization charges
5.0
1.0 6.1 1.6
Income from operations 67.7 78.3 125.1 145.4 Interest
and other debt expense
16.9
16.8 33.3 33.2
Income before income taxes 50.8 61.5 91.8 112.2
Provision for income taxes
17.5
19.3 31.9 36.7
Net income
$ 33.3 $
42.2 $ 59.9 $
75.5 Earnings per share: Basic net income per
share $ 0.55 $ 0.70 $ 0.99 $ 1.23 Diluted net income per share $
0.55 $ 0.70 $ 0.98 $ 1.22 Cash dividends per common share $
0.17 $ 0.16 $ 0.34 $ 0.32 Weighted average shares (000’s):
Basic 60,504 60,473 60,477 61,631 Diluted 60,860 60,728 60,841
61,899
SILGAN HOLDINGS INC.
CONSOLIDATED SUPPLEMENTAL FINANCIAL
DATA (UNAUDITED)
For the quarter and six months ended June
30,
(Dollars in millions)
Second
Quarter
Six
Months
2016
2015
2016
2015
Net sales: Metal containers $ 529.6 $ 553.7 $ 983.1 $ 1,012.6
Closures 206.5 207.1 402.6 405.2 Plastic containers
138.5 153.4
281.7 313.0
Consolidated
$ 874.6
$ 914.2 $
1,667.4 $ 1,730.8
Income from operations: Metal containers (a) $ 45.9 $
48.3 $ 83.5 $ 89.0 Closures (b) 25.3 24.6 49.8 46.2 Plastic
containers (c) 1.0 9.4 1.1 18.6 Corporate
(4.5
)
(4.0 )
(9.3 )
(8.4 ) Consolidated
$ 67.7
$ 78.3 $
125.1 $ 145.4
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Dollars in millions)
June 30, June 30, Dec. 31,
2016
2015
2015
Assets: Cash and cash equivalents $ 120.5 $ 126.7 $ 99.9 Trade
accounts receivable, net 394.8 443.9 281.0 Inventories 806.5 753.3
628.1 Other current assets 45.6 35.9 36.1 Property, plant and
equipment, net 1,165.1 1,082.7 1,125.4 Other assets, net
1,021.7 1,060.6
1,022.2 Total assets
$
3,554.2 $ 3,503.1
$ 3,192.7 Liabilities and
stockholders’ equity: Current liabilities, excluding debt $ 508.4 $
504.9 $ 628.9 Current and long-term debt 1,935.1 1,970.5 1,513.5
Other liabilities 421.3 444.7 411.1 Stockholders’ equity
689.4 583.0
639.2 Total liabilities and stockholders’ equity
$ 3,554.2 $
3,503.1 $ 3,192.7 (a)
Includes rationalization charges of $4.0 million for
each of the three and six months ended June 30, 2016. (b) Includes
rationalization charges of $0.3 million and $0.8 million for the
three months ended June 30, 2016 and 2015, respectively, and $0.4
million and $1.1 million for the six months ended June 30, 2016 and
2015, respectively. (c) Includes rationalization charges of $0.7
million and $0.2 million for the three months ended June 30, 2016
and 2015, respectively, and $1.7 million and $0.5 million for the
six months June 30, 2016 and 2015, respectively.
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
For the six months ended June 30,
(Dollars in millions)
2016
2015
Cash flows provided by (used in) operating activities: Net
income $ 59.9 $ 75.5 Adjustments to reconcile net income to net
cash provided by (used in) operating activities: Depreciation and
amortization 73.0 73.0 Rationalization charges 6.1 1.6 Other
changes that provided (used) cash: Trade accounts receivable, net
(111.6 ) (140.4 ) Inventories (176.4 ) (212.8 ) Trade accounts
payable and other changes, net
(13.6
) 67.2 Net cash used in
operating activities
(162.6 )
(135.9 ) Cash flows provided by (used in)
investing activities: Purchase of business, net of cash acquired -
(0.7 ) Capital expenditures (111.7 ) (98.2 ) Proceeds from asset
sales
8.8 0.1
Net cash used in investing activities
(102.9 )
(98.8 ) Cash flows provided by (used in)
financing activities: Dividends paid on common stock (20.9 ) (20.1
) Changes in outstanding checks – principally vendors (101.8 )
(82.8 ) Shares repurchased under authorized repurchase program -
(170.1 ) Net borrowings and other financing activities
408.8 411.8 Net cash
provided by financing activities
286.1
138.8 Cash and cash equivalents:
Net increase (decrease) 20.6 (95.9 ) Balance at beginning of year
99.9 222.6
Balance at end of period
$ 120.5
$ 126.7
SILGAN HOLDINGS INC.
RECONCILIATION OF ADJUSTED NET INCOME
PER DILUTED SHARE (1)
(UNAUDITED)
For the quarter and six months ended June
30,
Table A
Second
Quarter
Six
Months
2016
2015
2016
2015
Net income per diluted share as reported $0.55 $0.70 $0.98
$1.22 Adjustments: Rationalization charges
0.05
0.01 0.07 0.02 Adjusted net
income per diluted share
$0.60 $0.71
$1.05 $1.24
SILGAN HOLDINGS INC.
RECONCILIATION OF ADJUSTED NET INCOME
PER DILUTED SHARE (1)
(UNAUDITED)
For the quarter and year ended,
Table B
Third
Quarter
Year
Ended
September
30,
December
31,
Estimated
Actual
Estimated
Actual
Low High Low High
2016
2016 2015 2016
2016 2015 Net income per
diluted share as estimated for 2016 and as reported for 2015 $ 1.16
$ 1.26 $1.16 $ 2.59 $ 2.79 $ 2.81 Adjustments:
Rationalization charges 0.04 0.04 0.10 0.11 0.11 0.16 Costs
attributable to announced acquisitions (2)
-
- - -
- - Adjusted net income per
diluted share as estimated for 2016 and presented for 2015
$ 1.20 $ 1.30
$1.26 $ 2.70 $
2.90 $ 2.97 (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 and costs
attributable to announced acquisitions 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. 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/20160727005183/en/
Silgan Holdings Inc.Robert B. Lewis,
203-406-3160
Silgan (NASDAQ:SLGN)
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