Business News

Silgan Announces First Quarter Earnings and Raises Full Year 2011 Estimate

Wednesday 04. May 2011 - Silgan Holdings Inc. (Nasdaq:SLGN), a leading supplier of rigid packaging for consumer goods products, today reported first quarter 2011 net income of $26.1 million, or $0.37 per diluted share, as compared to first quarter 2010 net income of $26.8 million, or $0.35 per diluted share.

Results for 2011 included $1.7 million, or $0.02 per diluted share net of tax, for rationalization charges and $1.8 million, or $0.02 per diluted share net of tax, for costs attributable to the recent acquisitions of IPEC, DGS and Vogel & Noot and the recently announced agreement to acquire Graham Packaging Company Inc. Results for 2010 included $2.1 million, or $0.01 per diluted share net of tax, for rationalization charges and $3.2 million, or $0.04 per diluted share net of tax, for the impact from the remeasurement of the net assets in Venezuela. 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.
“We are pleased with our first quarter 2011 results as we delivered adjusted net income per diluted share of $0.41 as compared to $0.40 per diluted share in a very strong first quarter in 2010,” said Tony Allott, President and CEO. “Our metal container business was negatively impacted primarily by the expected decrease in domestic volumes due to the 2010 year end customer buy-ahead. The Vogel & Noot operations, which were acquired on March 1, 2011, performed as expected, as the negative impact of certain purchase accounting adjustments were largely offset by favorable operating performance. Our closures business benefited from the successful integration of the IPEC operations acquired in the fourth quarter of 2010 and strong unit volumes, which were partially offset by the impact of significant resin inflation. Our plastic container business showed improvement versus the prior year quarter despite a significant headwind in the quarter as resin costs continued to escalate,” continued Mr. Allott. “Based on our first quarter performance, we remain positive in our outlook for the year and as a result are raising our full year 2011 earnings estimate of adjusted net income per diluted share to a range of $2.60 to $2.70,” concluded Mr. Allott.
Net sales for the first quarter of 2011 were $703.1 million, an increase of $39.1 million, or 5.9 percent, as compared to $664.0 million in 2010. This increase was primarily the result of higher average selling prices in each of the businesses due to the pass through of higher raw material costs, the inclusion of net sales from the recently acquired Vogel & Noot and IPEC operations and higher unit volumes in the closures business, partially offset by lower domestic unit volumes in the metal containers business.
Income from operations for the first quarter of 2011 was $53.6 million, a decrease of $3.1 million, or 5.5 percent, as compared to $56.7 million for the first quarter of 2010, and operating margin decreased to 7.6 percent from 8.5 percent for the same periods. The decrease in income from operations was primarily attributable to lower income from operations in the metal containers business and an increase in expenses associated with corporate development activities, partially offset by an increase in income from operations in the closures and plastic container businesses.
Interest and other debt expense for the first quarter of 2011 was $13.9 million, an increase of $1.4 million as compared to 2010. This increase was primarily due to higher average outstanding borrowings principally as a result of the refinancing of the senior secured credit facility in July 2010 and the incurrence of Euro revolving loan borrowings to fund the acquisition of Vogel & Noot in March 2011.
The Company’s effective tax rate for the first quarter of 2011 was 34.2 percent as compared to 39.4 percent in the same period of 2010. The effective tax rate for the first quarter of 2010 was negatively impacted primarily by the nondeductible portion of the charge for the remeasurement of net assets in the Venezuela operations.
Metal Containers
Our metal containers business includes the operations formerly categorized as metal food containers and the Vogel & Noot operations acquired in March 2011.
Net sales of the metal containers business were $390.5 million for the first quarter of 2011, an increase of $15.4 million, or 4.1 percent, as compared to $375.1 million in 2010. This increase was primarily the result of the inclusion of net sales from Vogel & Noot and higher average selling prices as a result of the pass through of higher raw material costs, partially offset by lower unit volumes in the domestic operations in the first quarter of 2011 in the wake of the customer buy-ahead at the end of 2010.
Income from operations of the metal containers business decreased in the first quarter of 2011 to $38.4 million as compared to $46.4 million in 2010, and operating margin decreased to 9.8 percent from 12.4 percent over the same periods. The decrease in income from operations from a record first quarter in 2010 was primarily the result of lower unit volumes in the domestic operations and the negative comparison resulting from the 2010 benefit from the delayed contractual pass through of lower manufacturing costs as compared to the delayed contractual pass through of higher manufacturing costs in 2011, partially offset by continued improvement in manufacturing efficiencies. The inclusion of the Vogel & Noot operations also had a slight negative effect on income from operations, as the impact of certain purchase accounting adjustments more than offset favorable operating performance.
Closures
Net sales of the closures business were $160.0 million in the first quarter of 2011, an increase of $16.0 million, or 11.1 percent, as compared to $144.0 million in 2010. This increase was primarily the result of the inclusion of net sales from the IPEC operations which were acquired in the fourth quarter of 2010, higher unit volumes and an increase in average selling prices due to the pass through of higher raw material costs.
Income from operations of the closures business for the first quarter of 2011 increased $4.7 million to $15.8 million as compared to $11.1 million in 2010, and operating margin increased to 9.9 percent from 7.7 percent over the same periods. The increase in income from operations was primarily due to a $3.2 million charge recognized in the first quarter of 2010 for the remeasurement of net assets in the Venezuela operations, the inclusion of the IPEC operations, higher unit volumes and cost savings from rationalization plans. These benefits were partially offset by the impact of the delayed pass through of significant resin inflation and rationalization charges of $1.1 million in the first quarter of 2011 for the workforce reduction in Germany.
Plastic Containers
Net sales of the plastic container business were $152.6 million in the first quarter of 2011, an increase of $7.7 million, or 5.3 percent, as compared to $144.9 million in 2010. This increase was primarily due to higher average selling prices as a result of the pass through of higher resin costs.
Income from operations of the plastic container business for the first quarter of 2011 was $6.3 million, an increase of $3.4 million as compared to $2.9 million in 2010, and operating margin increased to 4.1 percent from 2.0 percent over the same periods. The increase in income from operations was primarily attributable to slightly better operating performance and lower rationalization charges. As in the first quarter of 2010, the first quarter of 2011 was negatively impacted by the delayed pass through of escalating resin costs. Rationalization charges of $0.6 million and $2.1 million were recognized in the first quarter of 2011 and 2010, respectively.
Dividend
On March 17, 2011, the Company paid a quarterly cash dividend in the amount of $0.11 per share to holders of record of common stock of the Company on March 3, 2011. This dividend payment aggregated $7.8 million.
Outlook for 2011
Based on the first quarter performance and a positive outlook for the balance of the year, the Company is raising its estimate of adjusted net income per diluted share for the full year of 2011 to a range of $2.60 to $2.70. This estimate excludes rationalization charges and costs attributable to announced acquisitions.
The Company is providing an estimate of adjusted net income per diluted share for the second quarter of 2011, which excludes rationalization charges and costs attributable to announced acquisitions, in the range of $0.50 to $0.55, as compared to $0.48 in the second quarter of 2010. The second quarter of 2011 is expected to benefit from the recently acquired Vogel & Noot and IPEC operations, improved operating performance across each business and a lower number of shares outstanding, partially offset by the negative effect of the delayed pass through of rising resin costs in the plastic container business and the plastic portion of the closures business as well as higher interests costs.