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Silgan Announces Record Second Quarter Earnings and Confirms Full Year Earnings Outlook
Copyright Business Wire 2018

--Record net income per share of $0.50

--Record adjusted net income per share increased 49 percent to $0.52

--Record second quarter segment income in the closures business

--Continued improvement in the plastic container business

--Completed favorable amendment to senior secured credit facility

Silgan Holdings Inc. (Nasdaq:SLGN), a leading supplier of rigid packaging for consumer goods products, today reported record second quarter 2018 net income of $55.3 million, or $0.50 per diluted share, as compared to second quarter 2017 net income of $27.9 million, or $0.25 per diluted share.

"The second quarter of 2018 demonstrated the benefits of Silgan's cash deployment model, as the Company delivered record adjusted net income per diluted share of $0.52, an increase of 49 percent over the prior year period," said Tony Allott, President and CEO. "The Dispensing Systems operations drove record second quarter segment income in our closures business, notwithstanding softer volumes for single-serve beverages. Our plastic container business continued to demonstrate its enhanced operational capability and delivered volume growth in a seasonally strong quarter for this business. Volumes in our metal container business were down in the quarter more than anticipated due to specific customer activities and delays in the fruit and vegetable pack in the geographies that we serve primarily as a result of unfavorable weather worldwide," continued Mr. Allott. "While some of these factors will impact full year volumes, others will shift volumes to later quarters as is typical in this business. Based on our performance to date and our outlook for the remainder of the year, we are confirming our full year 2018 earnings estimate of adjusted net income per diluted share in the range of $2.03 to $2.13, an increase of 26 percent at the midpoint of the range as compared to 2017," concluded Mr. Allott.

Adjusted net income per diluted share was $0.52 for the second quarter of 2018, after adjustments increasing net income per diluted share by $0.02. Adjusted net income per diluted share was $0.35 for the second quarter of 2017, after adjustments increasing net income per diluted share by $0.10. 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 2018 were $1.06 billion, an increase of $37.3 million, or 3.7 percent, as compared to $1.02 billion in 2017. This increase was the result of higher net sales in the closures and plastic container businesses, partially offset by lower net sales in the metal container business.

Income before interest and income taxes for the second quarter of 2018 was $104.1 million, an increase of $28.9 million, or 38.4 percent, as compared to $75.2 million for the second quarter of 2017, and margins increased to 9.8 percent from 7.4 percent for the same periods. The increase in income before interest and income taxes was the result of higher segment income in the closures and plastic container businesses, slightly offset by lower segment income in the metal container business. Rationalization charges were $0.5 million and $3.0 million in the second quarters of 2018 and 2017, respectively. Additionally, the second quarter of 2017 included the unfavorable impact from the write-up of inventory for purchase accounting in the Dispensing Systems operations of $11.9 million and costs attributed to announced acquisitions of $9.8 million.

Interest and other debt expense before loss on early extinguishment of debt for the second quarter of 2018 was $29.9 million, an increase of $0.8 million as compared to the second quarter of 2017. This increase was primarily due to higher weighted average interest rates, partially offset by lower average outstanding borrowings largely as a result of the partial repayment of acquisition borrowings under the senior secured credit facility at the end of 2017. Loss on early extinguishment of debt of $2.5 million in the second quarter of 2018 was the result of the redemption of all remaining outstanding 5% Senior Notes due 2020 in April 2018 and the amendment to the senior secured credit facility in May 2018. Loss on early extinguishment of debt of $4.4 million in the second quarter of 2017 was primarily a result of the partial redemption of the 5% Senior Notes in April 2017.

The effective tax rates were 22.8 percent and 33.0 percent for the second quarters of 2018 and 2017, respectively. The effective tax rate in the second quarter of 2018 primarily benefitted from the U.S. Tax Cuts and Jobs Act of 2017 and the timing of certain state tax rate changes in the current year quarter.

Metal Containers

Net sales of the metal container business were $524.9 million for the second quarter of 2018, a decrease of $4.8 million, or 0.9 percent, as compared to $529.7 million in the second quarter of 2017. This decrease was primarily the result of lower unit volumes of approximately nine percent, partially offset by the pass through of higher raw material and other manufacturing costs and the impact of favorable foreign currency translation. More than half of the volume decrease was due to a seasonal customer adjusting its inventory levels in the current period. Volumes were also impacted by a delay in the pack as a result of unfavorable weather worldwide, a customer plant shutdown in the fruit market and the competitive loss of a smaller, lower margin customer. These decreases in volume were partially offset by continued growth in certain other markets such as the pet food and protein markets.

Segment income of the metal container business in the second quarter of 2018 decreased $1.2 million to $48.2 million as compared to $49.4 million in the second quarter of 2017, and segment income margin decreased slightly to 9.2 percent from 9.3 percent over the same periods. The decrease in segment income was primarily attributable to lower unit volumes and higher freight expense, partially offset by lower manufacturing costs, a non-recurring charge in the second quarter of 2017 related to the resolution of a past non-commercial legal dispute and lower rationalization charges. Rationalization charges were $0.3 million and $2.2 million in the second quarters of 2018 and 2017, respectively.

Closures

Net sales of the closures business were $378.8 million in the second quarter of 2018, an increase of $29.7 million, or 8.5 percent, as compared to $349.1 million in the second quarter of 2017. This increase was primarily due to the impact of favorable foreign currency translation, the pass through of higher raw material costs and a more favorable mix of products sold, partially offset by lower unit volumes of approximately two percent principally as a result of lower demand for single-serve beverages.

Segment income of the closures business for the second quarter of 2018 increased $13.9 million to $47.7 million as compared to $33.8 million in the second quarter of 2017, and segment income margin increased to 12.6 percent from 9.7 percent over the same periods. The increase in segment income was primarily due to the unfavorable impact in the prior year period from the write-up of inventory of the Dispensing Systems operations for purchase accounting of $11.9 million, a more favorable mix of products sold as a result of strong volumes of dispensing closures, foreign currency transaction losses in the prior year period and the favorable impact from the lagged pass through to customers of lower resin costs, partially offset by lower unit volumes.

Plastic Containers

Net sales of the plastic container business were $155.4 million in the second quarter of 2018, an increase of $12.4 million, or 8.7 percent, as compared to $143.0 million in the second quarter of 2017. This increase was principally due to the pass through of higher raw material costs, higher volumes of approximately four percent and the impact of favorable foreign currency translation.

Segment income of the plastic container business for the second quarter of 2018 was $13.2 million, an increase of $6.5 million as compared to $6.7 million in the second quarter of 2017, and segment income margin increased to 8.5 percent from 4.7 percent over the same periods. The increase in segment income was primarily attributable to higher volumes and lower manufacturing costs.

Six Months

Net income for the first six months of 2018 was $101.1 million, or $0.91 per diluted share, an increase of over 97 percent as compared to net income of $51.2 million, or $0.46 per diluted share, for the first six months of 2017. Adjusted net income per diluted share for the first six months of 2018 was $0.94 versus $0.66 in the prior year period, after adjustments increasing net income per diluted share by $0.03 for the first six months of 2018 and adjustments increasing net income per diluted share by $0.20 for the first six months of 2017.

Net sales for the first six months of 2018 increased $244.2 million, or 13.4 percent, to $2.07 billion as compared to $1.83 billion for the first six months of 2017. This increase was primarily a result of the acquisition of the Dispensing Systems operations in April 2017, the pass through of higher raw material costs across all businesses, the impact of favorable foreign currency translation and higher volumes in the plastic container business, 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 metal container business.

Income before interest and income taxes for the first six months of 2018 was $196.3 million, an increase of $64.3 million, or 48.7 percent, from the same period in 2017, and margins increased to 9.5 percent from 7.2 percent for the same periods. The increase in income before interest and income taxes was a result of lower acquisition related costs, the inclusion of the Dispensing Systems operations, the unfavorable impact in the prior year period from the write-up of inventory of the Dispensing Systems operations for purchase accounting, lower manufacturing costs in all businesses, higher volumes in the plastic container business, a non-recurring charge in the prior year period related to the resolution of a past non-commercial legal dispute, lower rationalization charges, foreign currency transaction losses in the prior year period and the favorable impact from the lagged pass through of lower resin costs in the closures business. These increases were partially offset by lower unit volumes in the metal container business and legacy closures operations, the unfavorable impact from the planned lower seasonal inventory build in the current year period as compared to the prior year period in the metal container business, a less favorable mix of products sold in the metal container business and higher freight costs. Margins in 2017 were unfavorably impacted due to acquisition related costs of $23.0 million and the write-up of inventory of the Dispensing Systems operations for purchase accounting of $11.9 million. Rationalization charges were $1.2 million and $3.9 million in the first six months of 2018 and 2017, respectively.

Interest and other debt expense before loss on early extinguishment of debt for the first six months of 2018 was $60.4 million, an increase of $10.8 million as compared to the same period in 2017. This increase was primarily due to higher average outstanding borrowings as a result of borrowings for the acquisition of Dispensing Systems in April 2017 and higher weighted average interest rates. Loss on early extinguishment of debt of $2.5 million in 2018 was the result of the redemption of all remaining outstanding 5% Senior Notes in April 2018 and the amendment to the senior secured credit facility in May 2018. Loss on early extinguishment of debt of $7.1 million in 2017 was primarily a result of the prepayment of outstanding U.S. term loans and Euro term loans under the previous senior secured credit facility and the partial redemption of the 5% Senior Notes in April 2017.

The effective tax rate for the first six months of 2018 was 24.2 percent as compared to 32.1 percent for the first six months of 2017. The effective tax rate in 2018 benefitted from the U.S. Tax Cuts and Jobs Act of 2017.

Outlook for 2018

The Company confirmed its estimate of adjusted net income per diluted share for the full year of 2018 in the range of $2.03 to $2.13, which excludes rationalization charges and loss on early extinguishment of debt. At the midpoint of this range, this estimate reflects a 26 percent increase over adjusted net income per diluted share for the full year of 2017 of $1.65.

The Company is providing an estimate of adjusted net income per diluted share for the third quarter of 2018, which excludes rationalization charges, in the range of $0.74 to $0.78. At the midpoint of this range, this estimate reflects a 15 percent increase over adjusted net income per diluted share of $0.66 in the third quarter of 2017. Given the uncertainties around timing of the fruit and vegetable harvest in the U.S. and Europe, the results of the back half of the year could shift between the third and fourth quarters.

Conference Call

Silgan Holdings Inc. will hold a conference call to discuss the Company's results for the second quarter of 2018 at 11:00 a.m. eastern time on July 25, 2018. The toll free number for those in the U.S. and Canada is (800) 458-4121, and the number for international callers is (323) 794-2597. For those unable to listen to the live call, a taped rebroadcast will be available through August 8, 2018. 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 2571155.

* * *

Silgan is a leading supplier of rigid packaging for consumer goods products with annual net sales of approximately $4.1 billion in 2017. 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, personal care, 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 2017 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.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20180725005096r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: https://www.businesswire.com/news/home/20180725005096/en/

SOURCE: Silgan Holdings Inc.


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