Highlights
- Net income per share of $2.55
- Adjusted net income per share of
$2.77
- Cash from operations of $394.6 million,
or $6.55 per share
- Free cash flow of $179.9 million, or
$2.99 per share
- Commercialized new metal container
facility and two new plastic container facilities
- Increased cash dividend per share by 6
percent
- Completed tender offer for $269.4
million of stock
- Announced agreement to acquire
Dispensing Systems business
Silgan Holdings Inc. (Nasdaq:SLGN), a leading supplier of rigid
packaging for consumer goods products, today reported full year
2016 net income of $153.4 million, or $2.55 per diluted share, as
compared to full year 2015 net income of $172.4 million, or $2.81
per diluted share.
“In 2016, we posted adjusted net income per diluted share of
$2.77 and free cash flow of $179.9 million and positioned the
Company for further shareholder value creation,” said Tony Allott,
President and CEO. “Our closures business once again delivered
record operating income in 2016, as it continued to improve
manufacturing efficiencies and benefitted from a robust U.S.
beverage market due in large part to hot weather conditions across
the country. As expected, our metal and plastic container
businesses were impacted throughout the year by the footprint
optimization programs which included the commercialization of three
new manufacturing facilities. The Company is in a good position to
reap the benefits of these efforts in 2017 and beyond,” continued
Mr. Allott. “As a result, we expect to deliver double digit
earnings growth in 2017, with adjusted net income per diluted share
for 2017 in a range of $3.15 to $3.35. We also expect free cash
flow for 2017 to be approximately $220 million or $3.96 per diluted
share. These estimates do not include any impact from the pending
acquisition of the Dispensing Systems business,” concluded Mr.
Allott.
Adjusted net income per diluted share was $2.77 for the full
year 2016, after adjustments increasing net income per diluted
share by $0.22. Adjusted net income per diluted share was $2.97 for
the full year 2015, after adjustments increasing net income per
diluted share by $0.16. A reconciliation of net income per diluted
share to “adjusted net income per diluted share,” a Non-GAAP
financial measure used by the Company which adjusts net income per
diluted share for certain items, can be found in Tables A and B at
the back of this press release.
The Company delivered net cash provided by operating activities
of $394.6 million in 2016 as compared to $335.7 million in 2015.
Free cash flow improved $62.5 million to $179.9 million in 2016 as
compared to $117.4 million in 2015, due primarily to lower capital
spending and working capital improvements. The Company is providing
a reconciliation in Table C of this press release of net cash
provided by operating activities to “free cash flow,” a Non-GAAP
financial measure which adjusts net cash provided by operating
activities for capital expenditures and changes in outstanding
checks.
Net sales for the full year of 2016 were $3.6 billion, a
decrease of $151.1 million, or 4.0 percent, as compared to 2015.
This decrease was the result of lower net sales in all of our
businesses, each of which was unfavorably impacted by the pass
through of lower raw material costs.
Income from operations for 2016 was $299.7 million, a decrease
of $20.1 million, or 6.3 percent, as compared to $319.8 million for
2015, and operating margin decreased to 8.3 percent from 8.5
percent over the same periods. The decrease in income from
operations was the result of a 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 $19.1 million and $14.4 million in
2016 and 2015, respectively. Costs attributed to announced
acquisitions were $1.4 million in 2016.
Interest and other debt expense for 2016 was $67.8 million, an
increase of $0.9 million as compared to 2015 due primarily to
higher weighted average interest rates.
The effective tax rate for 2016 was 33.9 percent as compared to
31.8 percent for 2015. The 2015 effective tax rate was favorably
impacted primarily by higher income in more favorable tax
jurisdictions and the ability to fully recognize benefits in 2015
from the legislative extension of certain U.S. tax provisions.
Metal Containers
Net sales of the metal container business were $2.27 billion in
2016, a decrease of $93.4 million, or 3.9 percent, as compared to
2015. This decrease was primarily a result of the pass through of
lower raw material and other manufacturing costs and a shift in
sales mix to smaller sizes.
Income from operations of the metal container business in 2016
was $214.7 million, a decrease of $21.7 million as compared to
$236.4 million in 2015, and operating margin decreased to 9.5
percent from 10.0 percent over the same periods. The decrease in
income from operations was primarily due to higher rationalization
charges, the unfavorable impact from the contractual pass through
to customers of indexed deflation, the unfavorable impact from a
reduction in inventories in the current year as compared to an
increase in inventories in the prior year, start-up costs for the
new manufacturing facility and a less favorable mix of products
sold, partially offset by better operating performance.
Rationalization charges were $12.1 million in 2016.
Closures
Net sales of the closures business were $797.1 million in 2016,
a decrease of $7.9 million, or 1.0 percent, as compared to $805.0
million in 2015. This decrease was primarily the result of the pass
through of lower raw material costs, partially offset by an
increase in unit volumes of approximately 3 percent. The increase
in unit volumes was primarily due to strong demand from U.S.
beverage markets.
Income from operations of the closures business for 2016
increased $8.0 million to $99.8 million as compared to $91.8
million in 2015, and operating margin increased to 12.5 percent
from 11.4 percent over the same periods. The increase in income
from operations was primarily due to higher unit volumes, improved
manufacturing efficiencies and lower rationalization charges,
partially offset by the unfavorable impact from the lagged pass
through of changes in resin costs as compared to the favorable
impact in the prior year. Rationalization charges were $0.6 million
and $1.7 million in 2016 and 2015, respectively.
Plastic Containers
Net sales of the plastic container business were $543.9 million
in 2016, a decrease of $49.8 million, or 8.4 percent, as compared
to $593.7 million in 2015. This decrease was principally due to
lower unit volumes of approximately 3 percent primarily 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 unfavorable
foreign currency translation.
Income from operations of the plastic container business was
$5.2 million, a decrease of $2.6 million as compared to $7.8
million in 2015, and operating margin decreased to 1.0 percent from
1.3 percent over the same periods. The decrease in income from
operations was primarily attributable to start-up costs for the new
manufacturing facilities, lower unit volumes, the favorable impact
in the prior year from the lagged pass through of decreases in
resin costs and foreign currency transaction gains in the prior
year, partially offset by lower rationalization charges and better
operating performance later in the year. Rationalization charges
were $6.4 million and $12.7 million in 2016 and 2015,
respectively.
Fourth Quarter
The Company reported net income for the fourth quarter of 2016
of $23.7 million, or $0.41 per diluted share, as compared to net
income for the fourth quarter of 2015 of $26.5 million, or $0.44
per diluted share. Adjusted net income per diluted share for the
fourth quarter of 2016 was $0.48, after adjustments increasing net
income per diluted share by $0.07. Adjusted net income per diluted
share for the fourth quarter of 2015 was $0.48, after adjustments
increasing net income per diluted share by $0.04.
Net sales for the fourth quarter of 2016 decreased $23.7
million, or 2.9 percent, to $805.9 million as compared to $829.6
million for the fourth quarter of 2015. This decrease was primarily
due to the pass through of lower raw material and other costs in
the metal container and closures businesses, a less favorable mix
of products sold in the metal and plastic container businesses and
the impact of unfavorable foreign currency translation in the metal
container and closures businesses, partially offset by an increase
in unit volumes of approximately 1 percent in each of the metal and
plastic container businesses.
Income from operations for the fourth quarter of 2016 was $52.2
million, a decrease of $0.3 million as compared to $52.5 million
for the fourth quarter of 2015, while operating margin increased to
6.5 percent from 6.3 percent over the same periods. Income from
operations declined primarily due to a decrease in the metal
container business which was unfavorably impacted by a reduction in
inventories in the current year as compared to an increase in
inventories in the prior year, higher rationalization charges, a
less favorable mix of products sold and the contractual pass
through to customers of indexed deflation. These decreases were
mostly offset by better operating performance in each of the
businesses and higher unit volumes in the metal and plastic
container businesses. Rationalization charges were $5.1 million and
$3.6 million in the fourth quarters of 2016 and 2015, respectively.
Costs attributed to announced acquisitions were $1.4 million in
2016.
The effective tax rate for the fourth quarter of 2016 was 32.4
percent as compared to 26.2 percent for the fourth quarter of 2015.
The effective tax rate for 2015 was favorably impacted primarily by
the ability to fully recognize benefits from the legislative
extension of certain U.S. tax provisions during the quarter and
higher income in more favorable tax jurisdictions.
Outlook for 2017
The Company currently estimates that its adjusted net income per
diluted share for the full year 2017 will be in the range of $3.15
to $3.35, as compared to adjusted net income per diluted share for
the full year of 2016 of $2.77. This estimate does not include any
impact from the pending acquisition of the Dispensing Systems
business, which is expected to close late in the first quarter of
2017. In addition, adjusted net income per diluted share excludes
rationalization charges and costs attributed to announced
acquisitions.
Net sales in the metal container business are expected to
increase in 2017 as compared to 2016 primarily due to the pass
through of higher raw material costs. Income from operations in the
metal container business is expected to benefit from more efficient
operations with a full year of commercial production in the new
manufacturing facility and lower transportation and logistics
costs, partially offset by higher depreciation expense, the
unfavorable impact from the contractual pass through to customers
of indexed deflation and the unfavorable impact from a further
reduction in inventories. Net sales in the closures business are
expected to increase in 2017 as compared to 2016 primarily as a
result of the pass through of higher raw material costs. Volume is
expected to be flat in 2017 as compared to 2016 which experienced
record U.S. single-serve beverage volumes as a result of extended
hot weather. Income from operations in the closures business is
expected to increase in 2017 over another record operating income
in 2016 primarily as a result of increased manufacturing
efficiencies. Net sales in the plastic container business are
expected to increase in 2017 as compared to the prior year as a
result of modest volume growth. Income from operations in the
plastic container business is expected to benefit from the
footprint optimization efforts in 2016 and modest volume
growth.
The Company expects interest expense to increase in 2017 due to
higher weighted average interest rates and higher average
outstanding debt balances due to the shares repurchased in the
tender offer completed in the fourth quarter of 2016.
The Company expects the effective tax rate for 2017 to be
approximately 33.5 percent as compared to 33.9 percent in 2016.
The Company currently estimates that free cash flow in 2017 will
be approximately $220 million as compared to $179.9 million in
2016.
For the first quarter of 2017, the Company is providing an
estimate of adjusted net income per diluted share in the range of
$0.48 to $0.58. This estimate does not include any impact from the
pending acquisition of the Dispensing Systems business, which is
expected to close late in the first quarter of 2017. In addition,
adjusted net income per diluted share excludes rationalization
charges and costs attributed to announced acquisitions. Adjusted
net income per diluted share was $0.45 in the first quarter of
2016.
Conference Call
Silgan Holdings Inc. will hold a conference call to discuss the
Company’s results for the fourth quarter and full year 2016 at
11:00 a.m. eastern time on February 1, 2017. The toll free number
for those in the U.S. and Canada is 877-852-6579, and the number
for international callers is 719-325-4915. For those unable to
listen to the live call, a taped rebroadcast will be available
through February 15, 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 3998619.
* * *
Silgan Holdings is a leading supplier of rigid packaging for
consumer goods products with annual net sales of approximately $3.6
billion in 2016. Silgan operates 87 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 year ended December
31,
(Dollars in millions, except per share
amounts)
Fourth
Quarter
Year
Ended
2016
2015
2016
2015
Net sales $ 805.9 $ 829.6 $ 3,612.9 $ 3,764.0 Cost of
goods sold
695.9 716.5
3,079.4 3,209.9
Gross profit 110.0 113.1 533.5 554.1 Selling, general and
administrative expenses 52.7 57.0 214.7 219.9
Rationalization charges
5.1
3.6 19.1 14.4
Income from operations 52.2 52.5 299.7 319.8 Interest
and other debt expense
17.1
16.5 67.8 66.9
Income before income taxes 35.1 36.0 231.9 252.9
Provision for income taxes
11.4
9.5 78.5 80.5
Net income
$ 23.7 $
26.5 $ 153.4 $
172.4 Earnings per share: Basic net income per
share $0.41 $0.44 $2.56 $2.83 Diluted net income per share $0.41
$0.44 $2.55 $2.81 Cash dividends per share $0.17 $0.16 $0.68
$0.64 Weighted average shares (000’s): Basic 58,078 60,425
59,866 61,021 Diluted 58,496 60,750 60,249 61,306
SILGAN HOLDINGS INC.
CONSOLIDATED SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
For the quarter and year ended December
31,
(Dollars in millions)
Fourth
Quarter
Year
Ended
2016
2015
2016
2015
Net sales: Metal containers $ 491.5 $ 507.3 $ 2,271.9 $ 2,365.3
Closures 182.5 184.0 797.1 805.0 Plastic containers
131.9 138.3
543.9 593.7
Consolidated
$ 805.9
$ 829.6 $
3,612.9 $ 3,764.0
Income from operations: Metal containers (a) $ 33.2 $
41.4 $ 214.7 $ 236.4 Closures (b) 21.6 18.6 99.8 91.8 Plastic
containers (c) 3.4 (3.6 ) 5.2 7.8 Corporate (d)
(6.0 )
(3.9 )
(20.0 ) (16.2 )
Consolidated
$ 52.2 $
52.5 $ 299.7
$ 319.8
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
December 31,
(Dollars in millions)
2016
2015
Assets: Cash and cash equivalents $ 24.7 $ 99.9 Trade accounts
receivable, net 288.2 281.0 Inventories 603.0 628.1 Other current
assets 46.3 36.1 Property, plant and equipment, net 1,157.0 1,125.4
Other assets, net
1,030.2
1,022.2 Total assets
$
3,149.4 $ 3,192.7
Liabilities and stockholders’ equity: Current liabilities,
excluding debt $ 644.7 $ 628.9 Current and long-term debt 1,561.6
1,513.5 Other liabilities 473.7 411.1 Stockholders’ equity
469.4 639.2 Total liabilities and
stockholders’ equity
$ 3,149.4
$ 3,192.7 (a) Includes
rationalization charges of $3.7 million and $12.1 million for the
fourth quarter and year ended December 31, 2016, respectively. (b)
Includes rationalization charges of $0.1 million and $0.3 million
for the fourth quarters of 2016 and 2015, respectively, and $0.6
million and $1.7 million for the years ended December 31, 2016 and
2015, respectively. (c) Includes rationalization charges of $1.3
million and $3.3 million for the fourth quarters of 2016 and 2015,
respectively, and $6.4 million and $12.7 million for the years
ended December 31, 2016 and 2015, respectively. (d) Includes costs
attributed to announced acquisitions of $1.4 million for the fourth
quarter and full year ended December 31, 2016.
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the year ended December 31,
(Dollars in millions)
2016
2015
Cash flows provided by (used in) operating activities: Net
income $ 153.4 $ 172.4 Adjustments to reconcile net income to net
cash provided by (used in) operating activities: Depreciation and
amortization 147.2 146.3 Rationalization charges 19.1 14.4 Other
58.0 (1.2 ) Other changes that provided (used) cash, net of effects
from acquisitions: Trade accounts receivable, net (10.9 ) 12.3
Inventories 20.0 (97.6 ) Trade accounts payable and other changes,
net
7.8 89.1
Net cash provided by operating activities
394.6
335.7 Cash flows provided
by (used in) investing activities: Purchase of business, net of
cash acquired - (0.7 ) Capital expenditures (191.9 ) (237.3 )
Proceeds from asset sales
11.6
0.9 Net cash used in investing activities
(180.3 )
(237.1 )
Cash flows provided by (used in) financing activities: Dividends
paid on common stock (40.9 ) (39.7 ) Changes in outstanding checks
- principally vendors (22.8 ) 19.0 Shares repurchased under
authorized repurchase program (277.3 ) (170.1 ) Net borrowings
(repayments) and other financing activities
51.5 (30.5 ) Net cash used
in financing activities
(289.5 )
(221.3 ) Cash and cash equivalents: Net
decrease (75.2 ) (122.7 ) Balance at beginning of year
99.9 222.6 Balance
at end of year
$ 24.7
$ 99.9 Interest paid, net $
65.5 $ 64.0 Income taxes paid, net of refunds 58.1 49.7
SILGAN HOLDINGS
INC.
RECONCILIATION OF ADJUSTED NET INCOME
PER DILUTED SHARE (1)
(UNAUDITED)
For the quarter and year ended December
31,
Table A
Fourth
Quarter
Year
Ended
2016
2015
2016
2015
Net income per diluted share as reported $ 0.41 $ 0.44 $
2.55 $ 2.81 Adjustments: Rationalization charges 0.05 0.04
0.20 0.16 Costs attributed to announced acquisitions
0.02 - 0.02
- Adjusted net income per diluted share
$
0.48 $ 0.48 $
2.77 $ 2.97
SILGAN HOLDINGS INC.
RECONCILIATION OF ADJUSTED NET INCOME
PER DILUTED SHARE (1)
(UNAUDITED)
For the quarter and year ended,
Table B
First
Quarter
Year
Ended
March 31,
December
31,
Estimated
Actual
Estimated
Actual
Low
2017
High
2017
2016
Low
2017
High
2017
2016
Net income per diluted share as
estimated
for 2017 and as reported for 2016
$0.47
$0.57
$0.44
$3.14
$3.34
$2.55
Adjustments: Rationalization charges 0.01 0.01 0.01 0.01
0.01 0.20 Costs attributed to announced acquisitions (2)
- - - -
- 0.02
Adjusted net income per diluted share
as estimated for 2017 and presented for
2016
$0.48
$0.58
$0.45
$3.15
$3.35
$2.77
SILGAN HOLDINGS
INC. RECONCILIATION OF FREE CASH FLOW (3)
(UNAUDITED)
For the year ended December 31,
(Dollars in millions, except per share
data)
Table C
2016
2015
Net cash provided by operating activities $394.6 $335.7
Capital expenditures (191.9) (237.3) Changes in outstanding
checks
(22.8)
19.0 Free cash flow
$179.9 $117.4 Net cash provided by
operating activities per diluted share $6.55 $5.48 Free cash
flow per diluted share $2.99 $1.91 Weighted average diluted
shares (000’s) 60,249 61,306 (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 attributed 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. Acquisition 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 on-going 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 attributed to announced
acquisitions have not been estimated for future periods. (3)
The Company has presented free cash flow in this press release,
which is a Non-GAAP financial measure. The Company’s management
believes that free cash flow is important to support its stated
business strategy of investing in internal growth and acquisitions.
Free cash flow is defined as net cash provided by operating
activities adjusted for changes in outstanding checks and reduced
by capital expenditures. At times, there may be other unusual cash
items that will be excluded from free cash flow. Net cash provided
by operating activities is the most comparable financial measure
under U.S. generally accepted accounting principles to free cash
flow, and it should not be inferred that the entire free cash flow
amount is available for discretionary expenditures. 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 cash flows and the other information
presented herein. Additionally, such Non-GAAP financial measure
should not be considered a substitute for net cash provided by
operating activities as calculated under U.S. generally accepted
accounting principles and may not be comparable to similarly titled
measures of other companies.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170131006301/en/
Silgan Holdings Inc.Robert B. Lewis,
203-406-3160
Silgan (NASDAQ:SLGN)
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