News
For Immediate Release SILGAN HOLDINGS INC.
4 Landmark Square
Suite 400
Stamford, CT 06901
Telephone: (203) 975-7110
Fax: (203) 975-7902
Contact:
Anthony J. Allott
(203) 975-7110
SILGAN HOLDINGS REPORTS FIRST QUARTER EARNINGS AND
CONFIRMS FULL YEAR 2003 ESTIMATE
STAMFORD, CT, April 23, 2003 -- Silgan Holdings Inc. (Nasdaq:SLGN) today
reported first quarter 2003 net income of $4.2 million, or $0.23 per diluted
share, as compared to first quarter 2002 net income of $11.3 million, or $0.62
per diluted share. The results are in line with the Company's previous earnings
guidance of $0.20 to $0.30 per diluted share.
Net sales for the first quarter of 2003 increased by $30.1 million, or 7.1
percent, to $454.4 million as compared to $424.3 million in the first quarter of
2002. This increase was the result of higher net sales in the metal food
container business due to the acquisition of the White Cap closures business in
March 2003 and higher net sales in the plastic container business.
Income from operations for the first quarter of 2003 decreased by $10.0 million
to $26.0 million as compared to $36.0 million for the same period in 2002, and
operating margin decreased to 5.7 percent from 8.5 percent. These decreases were
primarily a result of unfavorable absorption of fixed costs as an inventory
reduction program was implemented during the quarter, higher
(more)
SILGAN HOLDINGS
April 23, 2003
Page 2
depreciation expense, a rationalization credit in 2002 and start-up costs
related to new capacity to manufacture convenience ends. The Company recorded a
rationalization credit in the first quarter of 2002 of $2.3 million, increasing
diluted earnings per share by $0.07 in that period, primarily related to placing
certain previously written down assets of the metal food container business back
in service to meet business requirements.
Interest expense for the first quarter of 2003 was $18.8 million, an increase of
$2.3 million, or $0.08 per diluted share, as compared to the same period in
2002. This increase resulted primarily from a higher average interest rate due
largely to the Company's add-on issuance of $200 million of 9% Senior
Subordinated Debentures and higher interest rate spreads over LIBOR as a result
of the refinancing of the Company's previous U.S. senior secured credit facility
in the second quarter of 2002, partially offset by the impact of lower LIBOR
rates during the quarter. The Company provided for income taxes at an effective
rate of 38.5 percent and 39.0 percent in the first quarter of 2003 and 2002,
respectively.
Metal Food Container Performance
Net sales of the metal food container business were $315.4 million in the first
quarter of 2003, an increase of $16.0 million, or 5.3 percent, over the same
period in 2002 due to the inclusion of net sales of the closures business for
the month of March 2003. Excluding net sales of the closures business, net sales
of the metal food container business decreased 1.3 percent as a result of
slightly lower volumes as compared to a relatively strong first quarter in 2002.
Income from operations of the metal food container business in the first quarter
of 2003 decreased by $10.7 million to $11.8 million as compared to $22.5 million
for the same period in 2002, and operating margin decreased to 3.7 percent from
7.5 percent. As anticipated, these decreases were principally due to unfavorable
absorption of fixed costs as an inventory reduction program was implemented, the
rationalization credit in 2002, higher depreciation expense, start-up costs
related to new capacity to manufacture convenience ends and increased freight
and employee health and welfare costs. Additionally, income from operations of
the closures business for the month of March was essentially break even as the
business continued to be
(more)
SILGAN HOLDINGS
April 23, 2003
Page 3
impacted by costs to restructure its metal closures facilities. Excluding the
impact of the acquisition of the closures business, inventories of the metal
food container business at March 31, 2003 decreased $20.1 million as compared to
March 31, 2002 largely due to the inventory reduction program.
Plastic Container Performance
Net sales of the plastic container business increased $14.1 million in the first
quarter of 2003, or 11.3 percent, to $139.0 million as compared to $124.9
million for the same period in 2002. This increase was principally a result of
higher unit volume due primarily to the acquisition of Thatcher Tubes LLC in
January 2003 and higher average selling prices due to the pass through of higher
resin costs.
Income from operations of the plastic container business for the first quarter
of 2003 increased $0.7 million to $15.5 million as compared to $14.8 million for
the same period in 2002, while operating margin decreased to 11.2 percent from
11.8 percent. The increase in income from operations was primarily a result of
higher unit volumes and improved operating efficiencies, partially offset by the
impact of higher depreciation expense, heightened competitive activity and
higher employee health and welfare costs.
Equity Affiliate
Effective March 1, 2003, the Company acquired the remaining 65 percent interest
in the White Cap joint venture that it did not already own from Amcor White Cap
Inc. for $37.1 million in cash and refinanced approximately $89.0 million of
debt of the business. The business now operates under the name Silgan Closures
and as part of the Company's metal food container business due to similarities
in end-use markets.
Silgan Closures is a leading supplier of an extensive range of metal and plastic
closures to consumer goods packaging companies in the food and beverage
industries in North America. The business, which had net sales of approximately
$250 million in 2002, is headquartered in
(more)
SILGAN HOLDINGS
April 23, 2003
Page 4
Chicago and presently operates seven manufacturing facilities. Manufacturing
facilities are located in Athens, Georgia; Champaign, Illinois; West Hazleton,
Pennsylvania; Evansville, Indiana; Richmond, Indiana; Chicago, Illinois; and
Queretaro, Mexico.
The White Cap joint venture was originally formed in July 2001, when the Company
contributed certain metal closure assets and liabilities in return for $32.4
million in cash and a 35 percent interest in the joint venture.
Schmalbach-Lubeca AG contributed the remaining metal and plastic closure
operations. In July 2002, Amcor Ltd. purchased Schmalbach-Lubeca AG's interest
in the joint venture. As part of the integration of the contributed businesses,
the joint venture instituted a program to rationalize the metal closure
facilities. This program is well underway and is expected to result in
significant cost savings starting in 2003 and continuing in 2004.
The Company recorded equity in losses of the White Cap joint venture for the
first two months of 2003 of $0.3 million, net of income taxes, or $0.02 per
diluted share, as compared to equity in losses of $0.6 million, net of income
taxes, or $0.03 per diluted share, for the first quarter of 2002. As expected,
the losses in the first two months of 2003 reflect the continued costs to
rationalize the joint venture's metal closure facilities. The results of Silgan
Closures for the month of March 2003 are included with the first quarter 2003
results of the metal food container business.
Acquisitions
In January 2003, the Company acquired substantially all of the assets of
Thatcher Tubes LLC, a privately held manufacturer and marketer of decorated
plastic tubes serving primarily the personal care industry. Thatcher Tubes
operates manufacturing facilities in Woodstock, Illinois and Culiacan, Mexico,
and had net sales in 2002 of approximately $29 million. Thatcher Tubes has built
a reputation as a high quality supplier of decorated plastic tubes, particularly
in the personal care market. With Silgan Plastics' leadership position in
plastic containers for the personal care market, this acquisition provides
opportunities for growth through an expanded product offering. Given its size,
the transaction is expected to have little effect on the Company's net income in
2003.
(more)
SILGAN HOLDINGS
April 23, 2003
Page 5
On March 3, 2003, the Company completed a $150 million incremental term loan
borrowing under its senior secured credit facility. The proceeds were used
largely to finance the acquisitions of White Cap and Thatcher Tubes. The terms,
including the interest rate, of the incremental term loans are the same as those
for B term loans under the senior secured credit facility.
In April 2003, the Company acquired the metal food can manufacturing subsidiary
of Pacific Coast Producers (PCP), an agricultural cooperative based in Lodi,
California, for approximately $15 million plus the book value of inventory. PCP
has historically manufactured a majority of its metal can requirements from a
separate facility in Lodi and used these cans solely in its food processing
operations. Simultaneously with the purchase, the Company also entered into a
ten-year supply agreement with PCP covering its metal food can requirements.
Annual sales to PCP under the supply agreement are expected to be approximately
$55 million. The Company anticipates that this business will be slightly
accretive to earnings in 2003.
Outlook for 2003
The Company confirmed its estimate of net income per diluted share for 2003 in
the range of $2.85 to $3.15. As a result, the Company expects to earn between
$2.62 and $2.92 per diluted share in the last nine months of 2003, representing
an increase of between 13% and 26% over the same period of 2002. This
anticipated increase will primarily be driven by increased sales and income from
operations in the metal food container business. The Company anticipates higher
net sales and income from operations in the metal food container business in
2003 as compared to 2002, largely as a result of the acquisitions of the
closures business and the metal food can manufacturing assets of PCP during
early 2003, as well as increased sales of convenience ends.
Over the next nine months, the Company anticipates higher sales in the plastic
container business in 2003 as compared to 2002, largely driven by both the
addition of the tubes business and anticipated new business. Operating margin
for the plastic container business is expected to decrease in the last nine
months of 2003 as compared to the same period in 2002, primarily as a result of
the impact of heightened competitive activity in plastic containers for the
personal care market.
(more)
SILGAN HOLDINGS
April 23, 2003
Page 6
The Company also expects higher interest expense in the last nine months of 2003
as compared to the same period in 2002, primarily due to higher borrowings as a
result of the three acquisitions completed in early 2003 and higher average
interest rates due to the refinancing of the senior secured credit facility and
the add-on issuance of 9% Senior Subordinated Debentures in the second quarter
of 2002.
The Company stated that it expects net income per diluted share for the second
quarter of 2003 to be in the range of $0.55 to $0.75 per diluted share, as
compared with $0.55 per diluted share reported in the second quarter of 2002.
The second quarter of 2002 included losses from the White Cap joint venture due
to a rationalization charge and an extraordinary charge related to the Company's
refinancing of its U.S. senior secured credit facility, which together had an
aggregate $0.10 per diluted share impact.
With three acquisitions completed in early 2003, the Company currently
anticipates focusing on reducing debt for the remainder of the year. Although
the Company incurred approximately $170 million of debt for three acquisitions
in early 2003, the Company anticipates that year end outstanding debt will
increase only by an approximate $100 million over the 2002 year end balance.
Additionally, in the absence of strategically compelling and immediately
accretive acquisitions, the Company anticipates this focus will result in a
further $200 to $300 million reduction in debt in the three years following
2003.
Conference Call
The Company will hold a conference call to discuss its results for the first
quarter 2003 at 11:00 a.m. EDT on Wednesday, April 23, 2003. The toll free
number for domestic callers is (800) 299-8538, and the number for international
callers is (617) 786-2902. The pass code is 922443. For those unable to listen
to the live call, a taped rebroadcast will be available until 11:00 a.m. EDT on
April 30, 2003. To access the rebroadcast, the toll free number for domestic
callers is (888) 286-8010, and the number for international callers is (617)
801-6888. The pass code is 89892257.
* * *
(more)
SILGAN HOLDINGS
April 23, 2003
Page 7
Silgan Holdings is a leading North American manufacturer of consumer goods
packaging products with annual sales of approximately $2.0 billion in 2002.
Silgan operates 69 manufacturing facilities in the U.S., Canada and Mexico. In
North America, the Company is the largest supplier of metal containers for food
products and a leading supplier of plastic containers for personal care products
and of metal and plastic closures for food and beverage products.
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. 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 2002
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.
* * *
(more)
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the quarter ended March 31,
(Dollars in millions, except per share amounts)
First Quarter
-------------
2003 2002
---- ----
Net sales .............................................. $454.4 $424.3
Cost of goods sold ..................................... 404.8 371.8
------ ------
Gross profit ...................................... 49.6 52.5
Selling, general and administrative expenses ........... 23.6 18.8
Rationalization credit ................................. -- (2.3)
------ ------
Income from operations ............................ 26.0 36.0
Interest and other debt expense ........................ 18.8 16.5
------ ------
Income before income taxes and equity in
losses of affiliate ........................... 7.2 19.5
Provision for income taxes ............................. 2.7 7.6
------ ------
Income before equity in losses of affiliate ....... 4.5 11.9
Equity in losses of affiliate, net of income taxes ..... (0.3) (0.6)
------ ------
Net income ........................................ $ 4.2 $ 11.3
====== ======
Earnings per share:
Basic net income per share ........................ $0.23 $0.63
Diluted net income per share ...................... $0.23 $0.62
Weighted average shares (000's):
Basic ............................................. 18,235 17,938
Diluted ........................................... 18,343 18,275
SILGAN HOLDINGS INC.
CONSOLIDATED SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
For the quarter ended March 31,
(Dollars in millions)
First Quarter
-------------
2003 2002
---- ----
Net sales:
Metal food containers ............. $315.4 $299.4
Plastic containers ................ 139.0 124.9
------ ------
Consolidated .................. $454.4 $424.3
====== ======
Income from operations:
Metal food containers (a) ......... $ 11.8 $ 22.5
Plastic containers ................ 15.5 14.8
Corporate ......................... (1.3) (1.3)
------ ------
Consolidated .................. $ 26.0 $ 36.0
====== ======
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31,
(Dollars in millions)
2003 2002
---- ----
Assets:
Cash ............................................. $ 31.2 $ 14.2
Current assets ................................... 556.5 506.6
Property, plant and equipment, net ............... 830.4 678.0
Non-current assets ............................... 252.6 195.4
-------- --------
Total assets .................................. $1,670.7 $1,394.2
======== ========
Liabilities and stockholders' equity:
Current liabilities, excluding debt .............. $ 244.5 $ 240.2
Current and long-term debt ....................... 1,185.1 1,036.4
Long-term liabilities ............................ 170.9 87.7
Stockholders' equity ............................. 70.2 29.9
-------- --------
Total liabilities and stockholders'equity ..... $1,670.7 $1,394.2
======== ========
(a) Includes a rationalization credit of $2.3 million in 2002.