SLGN - Earnings call transcript Q3 2017

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Operator

Good day and welcome to the Silgan Holdings Third Quarter Earnings 2017 Conference Call. Today's conference is being recorded. At this time, I'll turn the conference over to Kim Ulmer. Please go ahead.

Kimberly Ulmer

Thank you.

company Lewis, have Adam EVP and the and Allott, Greenlee, from COO. Bob CEO; and me today Tony I President EVP Joining CFO; and

to, uncertainties it we begin concerning this those turn on future in Form risks, and company, made may could the company and financial limited forward-looking the over the These the like other call based described not we or Annual in statements. that, call certain and, today, the events implied Tony. forward-looking a statements Before to Therefore, to Report made impacting XX-K the conference filings differ number statements. make With the but materially on actual therefore, SEC. it and operations beliefs forward-looking clear of company's results be from today upon that of statements expectations of would for I'll those including, involve XXXX are condition management's or with expressed

Anthony Allott

everyone, pleased Welcome, the financial quarter morning quarter, be questions and After on focus Kim. that agenda for XXXX to outlook you as for any be usual Bob, you, the this our The call. to I'll to performance third for Thank to XXXX. conference answer will earnings third review that Adam our have.

in delivered the quarter continue year This the acquisition an of prior to $X.XX increase on-track Operating our confidently operations delivered As dispensing adjusted or $X.XX quarter, third versus integration progress was systems which earnings within improvement good our the the volume improvement in we saw press release, attributable quarterly quarter to of per you the operational per and of demand, diluted container largely for performance share program and X.X% expectations. share business some as once deliver from the the to that perform and benefited synergies. again operational business performance the strongly and improve continue sequential growth. plastic with in expected an to is improving

to each and by well These in serving container our impacting Finally, markets in compared partly cooler performed to quarter. wet offset variety conditions food an year of expected a weather The to In U.S. stop their yields than productivity. record cooler conditions operational metal the the were Coast fruit tomato across much the pack business. West business driving of businesses were summer lower our led a abrupt beverage led and served lower a benefits the as season weather our in of XXXX. of single to

in third With the correction place the taking quarter. to filling largely activities

plans unscheduled were the impacted in incremental hurricanes by resulting a costs Additionally, our manner. supporting quarter several in customers logistical in of in seamless shutdowns our and

of range many range So share Bob maintaining earnings of over year. to and With additional our $X.XX. our a provide earnings the review and despite full tightening the to estimate by to of detail puts a of financial estimates year-to-date, I'll guidance turn explanations our the per the we're that rest takes adjusted results the more for in to year $X.XX bit around

Robert Lewis

Great. Thank everyone. morning, you, Good Tony.

within our above year results expectations quarter. delivered the Tony As and quarterly highlighted, we X.X% prior

be synergies. done, the unlocking progress still operations systems is we're there dispensing While and good to the integrating targeted work on making

make is footprint program the benefiting financial business optimization and improving to container plastic from its Our recent continues on performance. progress

closures rationalization the total business sales performance the included XXXX earnings net for to rationalization as included million basis, or quarter our increase of of XXXX the higher food closures charges of quarter. per On $XXX.X $X.XX acquisition were a acquisition million plastic per our in strong billion, business million to the adjusted quarter third $X.XXX had and of cost business, $X.X metal and diluted While quarter. they share a both, charges Dispensing Results container million diluted for from respectively. benefited Systems an container of per third and XXXX weather sales the impacted business and or operating both XXXX negatively issues legacy $XX.X related had was for $X.XX the increase compared $XX.X quarter share. for $X.XX million, Net income net the $X.X share totaling for and of $X.XX third income consolidated

to capital from $XX.X in $XX.X with million a third versus did rate As increasing the and quarter primarily in which third to the for due $X.XX impact $XX.X quarter long-term expenditures versus debt debt result, million net of $XXX.X higher average $XXX.X quarter fixed operations. share $XX.X XXXX. diluted outstanding year rates adjusted of interest million expense Systems borrowings include prior million average weighted XXXX the in the related Interest capital and higher Year-to-date, income Systems compared XXXX we the Net Dispensing of the debt delivered of per other including in for totaled increased February year. the $X.XX million, expenditures to acquisition million Dispensing XXXX. prior not totaled XXXX in

tomato lower fruit from the less a unit of prior quarter a and quarter. impacted acquired and in partially XXXX. currency These This of raw cooler material and of year partly higher negatively container $XX.X result foreign up material of for operations, Systems approximately single-served same our mix to impact lower the volumes of decreases pass-through of the and result operating the partially of million of less costs, to as pass-through each from served Additionally, million. I'll $XXX.X favorable third was due offset charges. These improvement from XXXX sold, as conditions unfavorable a business million versus to transaction the depreciation the a down million we This lag third the operations, in pack closure Operating inclusion a in a favorable of attributable in a increase cost, container million in year X% the higher increase versus primarily with lower costs volumes or for offset dividend of sales impact due due third the of $X.X primarily activities were lower currency of prior The business Volumes for container in the a from by metal sales of lower in raw units. translations. now of raw year market quarter. was result expense of costs largely the a operations single versus XXXX, cash product million. and of the an Dispensing recorded decline weather adverse was in the and by $X demand primarily to and was improvement $XX pass-through income the the of quarter. Coast resulted quarterly weather paid the is for in higher ago. operations from for plastic legacy our $X.X increased $XX.X This material closures $XXX.X for currency the beverages. translation impact of of poor of quarter $XX.X currency closures the by [ph] West to a in largely volumes Volumes offset the cost million This sales some charges from year total higher net customer impact per million, million of X.X% rationalization acquisition favorable business provide business Income versus offset million volumes. of a impact unfavorable a recently on of Dispensing quarter primarily X% increase foreign $XX.X Systems certain closures million approximately volumes. effect by business with beverage $XXX.X the foreign lower foreign September of rising million quarter result of the third the for the depreciation in Net decrease legacy share quarter X% less in million due at offset mix The favorable were XXXX, $X which volumes favorable quarter, and pass-through of $X Income was $XX quarter. expense. Net metal XXXX products decrease third $X.X prior were primarily rationalization and income the favorable of sold, incremental $X.XX the partially was operations. and declined losses translation costs, million the higher volumes by specifics decrease quarter were regarding to $XXX.X a partially increased of the the pass-through lower business the million higher deflation, the million indexed a to of benefits manufacturing unit operations.

the and continued of quarter $X.XX year. from to a over range the performance our fourth of Table earnings assumes to adjustments year, anticipated in of operations plastic in of on per based volume to the share. per the quarter compares $X.XX estimate XXXX; this for $X.XX excludes were outlined container the of rising This for fourth outlook in our tax to fourth the share, income but higher strong certain We're our $X.XX of to providing the our the release. Systems to XXXX performance outlook now and quarter the and adjusted adjusted Dispensing also tightening remainder some per B diluted estimate diluted business $X.XX share estimate impact the and carry year-to-date in prior estimate maintaining fourth quarter, press range the net cost in Turning which

our forecast discussed, million. And concludes that free previously cash prepared approximately with be we to that, remarks. continue $XXX As to flow

for she So directions so can I'll the it back turn Jessica, to Q&A provide session.

Operator

Mark we'll And go you. Thank Capital from Wilde Markets. first BMO to

Mark Wilde

just food more what you morning. market and if can by certain wondering little I'm Good color that? activities mean with a around customer in this us you help cans Tony,

Anthony Allott

Sure.

talking you're about the in specifically? markets, soup So

Mark Wilde

exactly. Yes,

Anthony Allott

quarter. two so and we the had negotiated a had in that's yet of that their contracts of demand little obviously and one retail think contracts ours. with who that's Yes, their customer, not had customer a level, kind We has unusual promoting events are on I impact customer

in process you can process filming it. through imagine, and another go that that as customer have is [ph], disruption We has moving to a the some that of as you demand line

don't kind all know broader point think those about there and a in kind probably really where we it it. a I to in to this I soup, going of our its that's think side is the of is I are happening here So is have unique think two I most this temptation but of opinions it's is items. volumes think cam soup -- soup on quarter, disruptions that are

better, we better, look level, promoting kind at activity I term of races no, soup bit in I what a but retail the for longer right say if take back trend stronger the everything wouldn't is you looks see now. seems the the is little think think bit a I that little at

I and customers kind specifically to just just -- -- are time, one would this doing I So exists unique to this and this think [indiscernible] more unique our is of these have some it's time long-term a period. think not carry on soup it's It just I quarter into say of could but third quarter story. to so next kind don't trying I'm

Mark Wilde

there. you anticipated Actually Okay. follow-on my

Just in how the resin possible the third quantify a other that from quarter? fourth ones; in of about couple it -- pass-through to drag and thinking the lags quarter is kind you're for of the the the

Adam Greenlee

Sure Mark, its Adam.

business impact million, increase resin everyone the the to of our in business much so our it in came knows, for QX, $X closures container a around really in the have our business did impact far be as of as didn't late tune plastic September third in headwind something we an to QX, will closures As in it quarter, QX.

to increase QX as increase the well. you September best the resins also our and have across board expected As hurricanes are in around seen primary mentioned,

in just So couple but at and the sit business dollars well. business QX unfavorable likely couple in of point I today, again, our would we'll as be dollars of we unfavorable million as plastics million here this a say our is a closures projection a

Mark Wilde

also a receivables, -- your the helpful. you sheet, that's your year cash sorry then noticed about lot a Bob, finally, color than can both a you're on going at look little you inventories we or XX%, carrying around are ago Okay give balance XX% up what's Adam, were more when there? And just but I just

Robert Lewis

cash jurisdictions the came of the some the couple a to consequence One things. a we've foreign in as Yes, got got acquisition. some Systems cash as of we've is, incremental that Dispensing of so just balance,

cash them was the in with bit So we as effect just quarter, up way a clean the not just for some the on issue. and the side us businesses. we're our would with little and we timing so over material timing And beginning year had a that's collected or carry as metal tight of terms on as other then cash with we that would the as yet but ended more quarter; from sheet and payments way some next we've to of little of a the be very into got the the customers cash prepare left payments raw just it next balance

Mark Wilde

Okay. with receivables? then your And

Robert Lewis

Yes, I be the big probably the being of if the to just you're at part Systems think balance looking going impact onboarded. is a sheet Dispensing just that of

Mark Wilde

Okay, very much. over. it alright. Thanks turn I'll

Operator

And we'll to Anthony go Citi. Pettinari from

Anthony Pettinari

Good morning.

in XQ; happened in I net mentioned I and a you think as well? you impact could there the And across impacted indicated what filling was negatively think you company you hurricanes that if residual if of hurricanes? release business. quantify the on You can maybe that in from the wondering finer really the was in put the your correction XQ any XQ activities was each impact -- point really is in

Anthony Allott

Sure second one take Anthony, I'll and take Adam on of one site. the filling leverage can first the

So have up, on we have in that do in the a we Rico. plant I -- we a hurricane to Puerto first -- three affected, side plant of plants do have cover all, think Houston, just

is So of lot there the of employees while side. quite damage, there a property bright damages, all that's and news safe a were series good the is are

so [indiscernible] So little because trucks, to taking a the the to it are food of inability shutdowns from -- impact ranges plain quarter which on accumulate hard it to and we easy down in get you're carriers, shipment go every you for instead got more so make, third shipment continue by to to the way. that's the carrier for particular going fourth while on and a a paying is for

course, certainly you, quantify to roughly going And there for impact $X $X that fourth would a quarter. fourth will talked then in effect which into hitting in million to of lingering and resin the quarter. we about be the some of So be the million also the Adam it is quarter

Adam Greenlee

do And beverages, the drink, really pre-sell of kind activities hot-filled Anthony prepare beverage year out to single our the off And in months consumptions season side, start business, closures the the of of joy higher we in those to summer for for the run selling or holiday assessment sports of What the hard, the things served etcetera. back that for months an time. on [ph], activities, prepare on customers retail our really typically and in the going our early early etcetera start their the [indiscernible] are the really February/March going how spring plays customers the are like part to of QX, and through part with is activities, schedules adjust they happens they summer summer forward. inventory our -- market those around filling again, consumption where customers their

we So, pull near back QX. time on hadn't where operations in continue we at/or their adjustment, long first our saw any just year prior years at filling running really locations we in have capacity; seen year was the those this a to customers

not filing to, issue effect just alluded really of of were February from that's operations the a we this running so third kind have QX Tony quarter. because you July, cumulative up hard as until So until the

quarter the as also seen previous be a little carried well the the of then but what So later cumulative we into filling will QX bit than and impact really standpoint. QX a the years effect have if what from in

Anthony Pettinari

meaningfully during industry with customer closure you've closure is it exposure, that's roughly about or is billion the capacity; tighten In cans, billion, helpful. the one cans. less think be it very quarter, talked competitors think announced over you? then your maybe Okay, food I in the given running And market impactful for a the the X.X over of you do billion X.X in X may could where -- that can past

Anthony Allott

it's a less impactful. think I

maybe so say let's -- a there. is not there a I it's the a so scaled as last plant writing, on some think is amount out but is of certainly so year certainly well billion left. accounts recall capacity huge we that still down helps it Again, capacity past, we the out shut late there in definitely it's as it's industry, and still capacity

Anthony Pettinari

Okay, that's it turn helpful. I'll over.

Operator

from we'll Fargo. to go Chris Then Manuel Wells

Chris Manuel

of some that here would stuff -- such. in in Europe and as were other for words, transitory And taking a two think like of kind flat just down I environment North sort kind temporary geography, to two out maybe for to and food you little -- how ahead the down morning, points, maybe A) perhaps versus the question. point through? a difference follow you an if broadly total do in with mid-single year, we kind in example? year Good digits full there in I sense, wanted then, back plays understand America being next soup of any of that U.S. the to get one, kind of as talked about thanks just; what then, get and volumes of is to thinking or you're but B) maybe think can But volumes

Anthony Allott

on geography the so U.S. in really all Yes, and about kind We is Europe it this side all flattish U.S. the the would to basically of were

you I next we bulk you say think year. so I mean come would to think transitory, when back the of would we saw, year think year; what

it what what there some I -- well. has -- this let QX I because as kind go I've think me been -- of don't means confusion read, through for about

was at So tomato on. go of tomato pack, we pack, two-thirds with was in a yields That -- that [indiscernible], if the of and that the in were the customers that can't little the whole about Coast our sort got of kind are one bigger ones in right; can't feel it's primarily, kind that this going down do that bulk anticipated. [Indiscernible] West going there of The was you and wet food is less cans, cool harvest -- pack the side; to good, the a etcetera. they on. really One it the of things to bit X% year look the so has three the stops. than had on of tomato's tomato, around, process as not

the West because impact us. us that's to and it's And inordinately so share larger Coast that what [indiscernible] the on tomato for side in will happened

see into in things; and So some that some pack, kind is Midwest, some of two will our that we had light third shift that of the we will is of the QX. so

And so there. three are elements those are of kind that to going the

I think you in a see next at would play of to year, should year. we All of of not next being time this soup, that necessarily kind would kind around and in typical it what think -- saw that we would year want same recover,

Chris Manuel

Okay.

So just of of that's And North generally there? or seeing helpful, thank or confirm; then is down whatever, growth X Europe of little the a say you. a kind you're as return so bit I offset? whole to America flattish mean

Anthony Allott

industry that supports markets in if are if so in happen of Yes, so probably path last us that so In I've year, the what the you reading path better will see some the things disproportionately of that the kind market positive going U.S., not recall some net as European you this definitely offset the and total X% year is in very I in would we're a market we're good is think so be in if the kind talk kind quarter the I'm the why decline some I what probably Europe, North it's but you growth, on have the you U.S., that. saw of at that American what share down market. Europe. in -- the growth and more think said in the look the others was of general, which to bulk X.X% that southeast is mean probably shifts of markets the in of to in us on had We impact to you, I

Chris Manuel

all I I helpful. had, you. thank Okay, that's for. looking what That's That's was

Operator

take now Staphos George And question Merrill from a of America from Lynch. we'll Bank

George Staphos

But the all of two-third much I very [indiscernible] impact your the down in preempted Tony, look would storm X% is for my say, and with everyone. terms West comments. already else? with of or down, Coast at the Thanks the of if Chris. guess of questions being, I X% split something one that one-third you that Hi, be

Anthony Allott

one-third No. Two-thirds pack issues of items. of and the combined all sort the soup

George Staphos

Okay, forgive me.

I calculation? effect like that couple paper front, here, that looks the would on in would fair some million I be like on So mean of of just be it that $X was pack; a the potential quarter, a

Anthony Allott

alone Pack three, be this -- that it's four. you pushing rough that is put to maybe but towards to somewhere going be in know, able

George Staphos

can then, a clarity clear Did asking frankly, contract. be bit I disclosed in little I'm provide that. is when -- -- items mindful to on for just Okay, mentioned, that just that? or their on And you one renew of is timing? thank the hasn't for yet any you you just we want the any to on correctly? activity And there think that and I really you first competitive the soup be you of And possible, it what thank the more a hear to I customer than that extent there should sign-up place that; or else, there is anything detail on more in

Anthony Allott

nothing retail to Well, do levels. the has this without

know, is to fight brand. and spend helps that all so, for of So space think on package promoting you -- that the shelf-space, and as the very retailer competitive a customers I both, have etcetera, I our

ultimately -- this that is time. that worked it unusual an will, but not So will you is our and out so process expectation be if takes

George Staphos

last then, had thank the queue. that. and And into back I turn Okay, come and for over I'll then question you I guess

ball of see can times overall segment in with of even you moving of was market contracts? own would markets, you there that this couple of because any the markets you're at business all in the Can in Any color kind quarter of a Thank business, end comment farm? mentioned Dispensing in customers, be it terms new a from you dispensing clearly terms the with good what the what the now getting legacy like the volume that of you and I'll business. with it higher Are new turn you. over. great. in from decline are result, the new pleased in You we pickup integration the

Anthony Allott

Thanks.

want, all, of that's where about the on very us know, feel the feel spend you're I We we and time good so team that we First if integration you a different our lot there all underway, that here growth stand the as good -- are reading into, of by going about business. right this each but expectation more really you can are lot areas/markets of to question, your there that sells is very and business product a those. of geographic regions; so be

blend view that that is because we're partly some time. were of the we're in during pipeline X% serving just products Our of the would were because coming above markets range, the the of sort in in partly say at performed that the risk sort at business there pretty you [ph] X% to that I area looking when this out. this is all quarter

us management makes the position. trying think pleased and and grow got of exactly competitive that good we've kind end that the all to So is opportunity is where they pretty growth markets

expectations to it stage. that, good this all feels So against really us our at

George Staphos

Tony. Alright, thank you,

Operator

And Deutsche Bank. we'll to from Jones move Debbie now

Debbie Jones

million, $XXX metal and If distraction $XXX this of think can year have or I things rolling have for that about at kind containers. go is and I EBIT of should I new from running some if morning. few the look get Good be I can question plant, changed that? How through cam AirTV, levels? a but business should I is, to view, some million in [indiscernible] three question return is you're think that productivity my about quite type there two the that

Anthony Allott

pass-through It's kind think a to continue account, the new definitely got -- that question you've say would I take Yes, of improve it right; contracts you've will had contracts, things happening those, steady kind got we been or last to overtime. has kind until Well, us structure, win that's on what from for before. years of the cost business of business, it's to we've into all our concession over on we this for deflation you do three a give inflation. of impact a back get big what's erosion plus the

inflationary EBIT year get one-time moving from kind So in number. our of now, put that, plant with numbers settlement new a is a you settlement, will forward, against environment, good that improvement that us into back of non-commercial the had we employee that that's there, obviously right in if kind start we in X/XX-ish then absolutely this expectation of embedded the

got So of move level overtime towards to but higher inflation a a helpful. profitability think lot parts you've we moving absolutely be back would continue we'll but

Debbie Jones

And just longer number plastics, then, any Okay. two in for of you Puerto outlook just growth ones, from term kind And to do your then Rico? exposure quick have one? impact the

Adam Greenlee

Debbie. Sure,

deliver kind we've getting outlook. long-term of Number about On the million all and the earnings plastics, of XXXX of really along, again, as the cost to was that's out improvement. $XX one, said business and been our plan

feel to we're heading business we is obviously about we do see of look turn kind that and expect on-track and the is news we good XXXX; where perspective. bigger financial continued the in forward to as page in business a So from improvement the

that for occur as X% saw that although aiming we're but XXXX XX% XXXX in quarter. and business, and still January again, the is in of same see margins you tracking for the unit as it's year-on-year EBITDA won't won't on XX% the increase market, in we our X, volumes are target long-term -- as the successful You we're improvement of to magnitude still

that help cost As lower business and objectives. achievement operating be you long-term plastics grow see, the platform to will a began us will our unit and leveraging volumes

Anthony Allott

in full maybe so overall. where do have And know, not Rico a the -- we line we of Puerto plant small some you we plant, exposure, have single there is it's

Debbie Jones

turn I'll you. Okay, thank it over.

Operator

from And we'll go Baird. W. Panjabi to Robert Ghansham

Unidentified Analyst

actually Hi, [ph], sitting Ghansham. in Matt good is for morning. This

do the So volume is detail segment? volumes, etcetera? the gains, the driving how then volumes plastics is that you team, container growth, industry across you can plastic view sticking that on of exactly share provide with what better What's driving the sustainability higher And growth? that

Adam Greenlee

our we in been of business Sure. some period again, of A couple so plastics we program time; number a one, exiting things; have Adam. cycling over rationalization Matt, portfolio business. are on some it's for of

on, we where it's the bring so to business lower realize So important against growth, feel while starting base, it's as the about we it good volume we're new X% as well. from

so we think in with I is we our our serve. there is we've the is in that it comes plastic space quality due we're overall sustainability We platform there still markets impact actually the the drop lower a there, to we in delivery grow established. the executing the and performance think will of of markets think volume customers and quite think good, We a business on, broad and broad as opportunity opportunity products that service performance cost the superior the etcetera. do to that well serve through as of

Unidentified Analyst

looking plate can at heading what of kind your with inflation for are XXXX, on etcetera? things then, inflation next codings, headlines a particular wages, cost that expectations year? focus into of you And the And Okay. thin surrounding like can kind answer

Adam Greenlee

Sure, a lot to that.

Two, Wages First of curve that be just plastic is wage on we're indication hard inevitable but seems it certainly people think markets; all good get on every to both but everyone one. inflationary us. On which will think inflation also so bet, on codings, of time talent real, to I is I broadly in be have you it. year's is I our pretty and all, that's that is past to as inflationary, how significant, our now at fuel/oil that going right very what be steel of but etcetera, side follow so cost and doing. be mind, definitely is customer that's in for that some point a figure thought move. of think are definitely is the in I'm our kind to got that out side to sure some our news in – would the going to hiring It bulk would curve; that

to do I I will are the coming forward. or whether think to know So to as don't go I we're we but some if than commodities, we [ph] think be mermadoths inflation, inflation a back back inflation significant other that

Unidentified Analyst

That's it thanks. for that's helpful, me,

Operator

from Josephson from will And question come our next Adam KeyBanc.

Adam Josephson

can there beverage food the that. weather the couple despite so are the Bob, weather resin the Tony morning. affecting serve right maintaining a the a full colder about issue, all disruptions with adversely customers, inclement the Good issues, affecting year issue; consumption, or hurricane issues single pack, Coast five you're yet talked the your guidance West your you of few those

you're able so? I to how do So guess

Anthony Allott

Good things. question, of couple a

First half loss. take we of did we so unfortunately that's range, tighten a our some -- mind, for of the know, we the top did all, the of -- had to business, so real you the in take possibility

helping is [ph] on well, the Dispensing Secondly, the as I that's -- think Sumit Systems call, is so us. business performing

get sort but pack year, of Thirdly, this coming some overmake is the want point on down, there metal working that that that that. QX comparison so to inventories the QX, year point negative back we back comparison a don't in is in I we'll Last as benefit and some of but a were had a last business, food quarter. can container on in impact

helps a inflation and This etcetera, quarter so my we'll on that inventories given bit. probably comments steel building be

QX, bit that are So many we in better. things QX little things think there as affected is, could the in there troubles be a were effect why many there

Adam Josephson

the Got all it Systems, guidance to have you $XX Dispensing is it. up at your just still related million? And synergy to or

Anthony Allott

think we've confidently, the feel so inserted I not I but the haven't. increased good word that XX% number. We very about we

Adam Josephson

as know, know one, of happened. overall I of which competitor be your U.S. transitory year-to-date Okay. in time the not of some one that's about down first And market; previous effect the can is couple earlier, know just and food of can there adversely the well; factors the of market is demand pack one as is you broadly see in production as years mentioned the could but declining. last their some said just a that so Obviously, whether this been points, you have those food

So your of longer this what is market, term why? volume view for trajectory the and

Anthony Allott

growth. we've reason I XX the food question, if the questions. it's look things; of I bit would the of of for a that argue is it's be main at versus think, you couple of of today human even still -- still a The one maybe very the majority terms going time cans our -- forward, a good the kind we'd little of years sort flattish things product less can efficient that food of was are in infrastructure a cost so the retort they wasn't right. customers good for period get consumer. cost and to are true in now is the food is, they all profit a are [ph], cans at that system, but a in when the There ago, which very of

So can. is what the we feel food pretty that base, good about in

are seeing and changing can [indiscernible], I what a cans is cans food protein you're that consumed, pet which also You're believe growth, are more it's markets. more that general seeing in of for on

good. I with of feel think we all So pretty that

like I fruit, continued decline. probably things see think on you'll

home, you'll tomato, it's great think package, the constancy I much at so I think people cook of case. how kind in probably its a see

So you'll declines. -- but well some see probably desks, some

will it think kind but is I flattish continue have probably evolution an in where should overtime. consumed, be the our is of what of that food you can markets to view

Adam Josephson

Tony. Thanks,

Operator

now we'll Gaffner And Scott to [ph] Barclays. from go

Unidentified Analyst

too I the I I you and When morning. where situation their moving think is production filling sense, for taken soup of is such manufacturing that moving a a just might lines; the customers well filling wanted Good of customers look bit is business, you incremental again or your that at significantly your move Tony, far? to this have a some CapEx to locations as were some have you mentioned get

Anthony Allott

that's far. Yes, too

do one If moving West lot to that facility you're the of and kind the we to in Midwest. built to referring with had reasons of why new Coast a the Iowa

of where Midwest, so abandoning got you've So this case in a not West of -- alternatives you're etcetera; Coast sort a same more capacity. lot is it's situation than kind that

moves our think that's does the and in of So system, do I don't automatic while that's kind time, it an what contortions we all point. so create

a the if Now efficiency we always that project, with for that facilities we and looking that ways looking can enhance could facilities includes are run to run. we system, said, was the at always that XXXX our of

about, but to that So a if own. be more would footprint make change it on sound not efficient move as does there always is I we thinking want aren't precipitate don't this particular its of set

Unidentified Analyst

Dispensing kind seasonality business, is facility in at over offset legacy -- and the you that if that when or legacy And time both maybe Dispensing the opportunity Systems business either so just on a to same you business you versus different have way; closures look question the with business, the avoid those and can the go-forward when the Systems the one there this of basis? but a do much some in businesses how at Okay. capital you have similar of look those in closures

Adam Greenlee

nice and in was is little, and you closure closures, our among side full those our if anyhow. that not a of idea, Yes, sets are of it's there so of lot a very synergy quite look at access capacity challenges, other both that not businesses

to And unfortunately. so there much not is that

Unidentified Analyst

a above last a you're then be deleverage leverage; absolute -- and mean, where already you Do one like on And I to or to at go-forward going to year just the of deleveraging higher here, obviously the end this, look when Okay. level XXXX the is you maybe been you of range me, you feel as normally. still the to you another come for you'll you've year -- leverage be basis? envision through comfortable

Robert Lewis

Bob. is this Scott,

but but sort we said the cash Dispensing Systems this we've perfect the we all the ground present delever. themselves way we've business were and way flow business that clearly That very know up previous that like calls and we this could paint think the picture, we in of industry. would the pro not covered around if the levering opportunities certainly of intend free that's forma profile that's that we would acquire that to to we I exactly execute,

we down end back we of where are time we'll or now. closer above So by year the so certainly to tick a from the the the down be get to floor, that but

cash full us to QX. happens know, it year us you it incremental all flow generate for As a in because takes

So we I to good by that stopped business, for to have invest cash SDS think profile, any about we pretty we M&A about fact feel the the good of flow given in really opportunities stretch. the looking not integration the continue feel generation

the and be and disciplined cash makes it a think So and are; we'll of just now opportunistic might when supports those sense, of it's and happen I magnitude not. the when order be profile what can free things we timing where flow so it's we'll it

Unidentified Analyst

Good luck. thanks. Okay,

Operator

And our next from Dillon Vertical question comes from Research. Chip

Chip Dillon

Good morning.

other fourth of in out First has way now you the the the the there year; hurricanes, pass-through with in and next hitting, terms question quite control some -- the believe I just your coming plastic resin prices start expecting you should first did space ease people that to everyone's is, obviously that or that and on when should does is Gulf of the a either which of issue half in mechanism quarter; mention to said experienced is a you the on, capacity let's especially start say that impact lag the have of with Coast the businesses? do bit some that in how turn

Adam Greenlee

different. answer I'm a it little Adam. a closures to are bit just of on space Chip, plastic bottle a say on it's Sure kind capacity to basis going

right, resins resins some but they in come for the our primary will term the and are forecast price. will next our you're for down but think year the I in across what So QX, back largely we're carry board expecting of primary increases longer that

but happens legacy days to known that XX seen pass-through of be yet business, is a we closures or when have be So XX our roughly closures business, that's in kind timeframe. to our on the

on on XX to they be as and decreases we'll quarterly operate passing a basis. going those basis. as through occur through systems both fairly plastic and lag on business bottle cost on and pass-through same we'll So those rapid basis also business our resin a as new forward occur XX day decrease increased they resin decrease, be cost dispensing prices passing that based then The

as So again, increase resin you'll QX subsequently of thereafter XXXX being pass-through in look at kind well. of and QX

Chip Dillon

as probably there question, though even for What that -- nominally screen our look it's multiple second curve the you I rates? if short-term of the -- you on dealer last it the and guess, swaps in what debt; out of rate a the if protect doesn't? long increases in you might then at we as do have know, what rates long are interest see And end expectations your show Okay. for Bob flow to changes some is at in increases. and would swapped up of short-term is and how more exposure -- to there And swaps and of move terms several is; least interest

Robert Lewis

went in of Chip, kind offerings our did. February know fixed the you As we out and a that we two bunch for issuing note by of the back market debt

we're higher XX-ish percent So basis down obviously I year-end be that that some sit than significantly as today think at as revolver. fixed; here will we pay a now we our

the through last as today, comfortable fixed we're more that certainly think five been manage sit certainly, can here pretty if years we than we over anyway. -- today the or have I last and feel we that we So six

opportunistic So should I rising think be we happen to the that and we've done some that ourselves evaluate rapid can. continue while and things rates protect we'll to against

Chip Dillon

in percentage so is guess And said more systems and the if differently, once point? acquisition; the the you so the this kind -- in dispensing XXs, paid maybe normalized fixed that obviously, not at is from of XXs; get debt down maybe fair a the

Robert Lewis

would of fixed getting of but towards move pretty be of terms move more outside probably the yes, is scope. XX order a probably but the to big in there magnitude That's a

Chip Dillon

Understand. Thank much. very you

Operator

Narayan And we'll RBC Markets. Capital to go Tom from

Tom Narayan

that but you for of typically you the did guess contribution revenue Thanks specific dispensing George's dispensing XQ; better X% disclose the taking to you mentioned had question. X% I growth about guys it's hit piggybacking QX? off was in earlier; systems systems in question

Anthony Allott

not. did We

Tom Narayan

Or its growth?

Anthony Allott

it's It's to to to some the the magnitude, growth segment the pushing equal up about order million $XXX of… it's what in of was,

Tom Narayan

I it. got

perfect business, you framework about compare guys ROIC thinking invested capital and metal want would containers closures appetite the two you return like, from based of potentially Okay, guys dynamics in now Or that versus what do exposure you your you you? containers to of invested how that's or M&A? just your return your plastics of the scale metal through And of for kind increasing trying have gauge on plastics perfect. of just what -- find capital

Anthony Allott

you me, would. if Rephrase the question for

Tom Narayan

just appetite your or exposure increasing for containers. outside your plastics I'm guys metal understand of trying to to

Anthony Allott

we good you all to cash say investments stand we make whichever would we I criteria; do that. want saw a so return, return, on that use would same the plastics Well, metric it in if up to

we I want right we got context significant we kind get that that a in be right that premier is little in the player team, have be a marketplace. think anything in of to ourselves said we've plastics, solution do sure before further feel we like the what that to

in I whole sort certainly to that a little discussion than better think the that progress XX%. ago yet, I around we XX% the we've did bit of margins seen regard we're to-date us this XX makes done that's months feel don't but think with EBITDA

us on the see the But we strategic XX% fit in can its opportunities, own to today, think -- would be if about plastic more the basis we little yet, we we capital investment the think good each investment we bit the not do get that would of and could case. and there to on on that capital so and if plus feel it so we return make we We're a on certainly space. return there I that get pretty where right sustain think it. would had market business bridging we unique really, as there that something on in

Tom Narayan

last Got it. And question.

You XXXX on guys maintained for guidance EPS. your

million $XXX being gave flow of think is guys free quarter How that? out of call we also a you think I your should cash fourth guidance about in maintained? XXXX that

Robert Lewis

did guidance I remarks our at that we opening in holding are did. $XXX we approximately confirm Yes, million. the

Tom Narayan

great. Thanks. Alright,

Operator

We'll now Goldman from go Maguire Sachs. to Brian

Brian Maguire

question. good taking Hi, guys. my for Thanks morning

well to back about -- markets there is particular retail up lot the contract. and of some come surprise a days in retailers, food. environment the of a earlier question remarks generally now wanted the little that in no pressure in to your a customer come Just Amazon super the remarks these in for in facing George's as -- prepared deflationary I guess come

going wondering just customer maybe chain. just lower a You the up that ultimately for for particular end than there's back like shelf its supply consumer. end the of but to deflation particular lot more works of in competition space broader of seems contract as I know prices some this this this is or it kind and way presumably with your thoughts

Silgan's know of and have position environment? how any you make might You in kind you about deflationary think there that contribution to food guys

Anthony Allott

question. it's Well, great a

years. start all, let's of let new XX retailers saying up say might me been it's last new. be the look the brand, big space coming not of First E-commerce but over XX, kind by you box just that at have

of target time, system. exactly Our out customers XXXX been for cost is cost take pressure on significant vision of of ourselves new intense that our with a kind long can a have we went under why our out period

of can what the on we we're to was So, our of all we've our And language. of all got where possibly every about, focused the very system, focused net value add we to very that was looking out common value of customer system long of idea we're out on been do delivering our out total our cost investment, customers this of e-commerce that and it's is on. customers. way problem system to delivering suppliers' before all that's the our Getting part get return our and but at

for already deliver to I your low-cost of the because well consumer. are kind is food cost that question product to So, customers incredibly Silgan to positioned we a market think situation the specific provider low of for our end in kind of

the just running of can thinking because the and that a that so we're value delivery lot making are that time to do we advantageous the sure product they other system low-cost hard numbers our So, chain, good spending out against about opportunities of customers consumer that I about feel there. sure, through really a can making with they is was really on

about really our feel our for of make part costs which Iowa we XXXX on good still reduction vision driving is to can good low-cost customers. cost new We're about to structure. in So, a plant we program. down working our The was it, feel keep really solution cost that

it. feel a evolve about our I position is won't are on So, going to the lot think but it I way to I and think going out good things change really here come

Brian Maguire

lot wondering the and you is on are was low to issue sort a if back like closures the it there, if of this volumes but right artificially year? next think whether or a a then wondering And makes factor That ago more sense. year bounce volumes Okay. of of there tough an a temporary just comp year

Adam Greenlee

but think Adam, I It's yes the all to above. of Brian

So and we products and for quite quarter. total one XX% record period down a last yes, the the was built XXXX. and year sports in quarter off our hot is QX sports while are built the our was Yes, market segment market X% the third record year a hot year-on-year in in time and to in categories drinks versus the cycling the in for the of in drinks largest first

back a we are do XXXX normalize think opportunity So, and come for year. it's that bounce one-off we period back volume that and XXXX. think next provides to expecting We for a

Brian Maguire

one sense. Thanks. Okay. That last makes Bob. One for

was it to XQ? tax-rate thoughts the on the interest in where in any quarter or Just relative expense fourth

Robert Lewis

Yes.

probably we're be. the kind tax-rate point the on think at zeroed in this in on going to I year where of we're

bit items. comes the those Interest change tax two QX right a I for think that expecting. consistent -- delever; a So, not QX probably sequential we're on that's barring don't foreseeing something start tax-rate in laws to so little I basis or way any as down what versus we're a just see we is we now,

Brian Maguire

thanks much. very Okay,

Operator

Lynch. from a we'll question take Staphos Bank George of And from America follow-up Merrill

George Staphos

Hi, for the taking Thanks everyone. follow-on's.

can so? So XX just you've quick but what's XXXX; and can us the what Tony, to a give on next on in not questions next minutes next months of on vision your able been you maybe one my status you or hit of of horizon update XX the on accomplish

Anthony Allott

Sure.

First wasn't sure follow-up should on your of everybody get that. following a all, questions; is you I George, else

George Staphos

that's If me you the fine. from bounce queue, want to

Anthony Allott

I'm kidding.

CanVis in [ph] So XXXX is ongoing.

to not similar I think first success, it's it's talking we all thought so it. board, the had when that significant started what over we've again I about all

the very part that freight instance, a big been side go in for have lot at is etcetera. to there and yet footprint, in I new and So impressive looking more thing The there. done Iowa really know plant a the still we've of is

at that's ongoing. lots system sort kind our gauging of down of are of We and projects throughout

a So think in we're that, more said doing that some our case it, did I've on getting it. lot always more customers just of focused before, I of we

getting everyone we on that think suppliers and So take kind get that other the I deeper early root in that. and of that's customers helping the build of us slower to their things of about trust then all between and a slow that contact to is underway, our little are opening and talked each systems, one efficient, to another books been the more

I that's we're now seeing cases, think opportunity of headway in out there. I sits think future that some so the some

I And system So delivered would at far we of avenues say would the see of out said that right on-track continue little are beginning. have everybody. although still to we have so like press different forward and the than to good we what take it for looks cost a to really would

George Staphos

what a way a the is And XXXX? on why like there number a put benefit put look not the to but number on might want than I to less recognize you this might in

Anthony Allott

investor it was bulk was was idea, that the to that recall turn out be capital. again, whole our to a intended never a on goes huge customers, of this the Well, that program, it

a of have really we of invest to maybe But the scale might next that, capacity number this, year a maybe than maybe end somehow in something all that of $XX somehow time. capital it's sort don't higher of million if the $XX be million what's associated. of it's little but range the to I high associated a on think say I you So would happening

be go with active that of finding that of On that Again, a will bulk the an was outcome to customer's what don't integration project today issue, will and throughout the system there on but I certainly cost account. will customer major drive know we our some so do of -- value. the the kind have

George Staphos

back quarter quite so to food my the was you come and wasn't number aspirational, I I takeaway whether posted not back it million And and in we've likely think of in earlier I had said about said on quarter, question, $XXX -- the that's clear; Okay. -- getting want and an current last round cans, Debbie really world. just last EBIT to

you change? you your pass-throughs need answer the getting beyond get does for working that something the or the to else a start inflation, If do favor change in

Anthony Allott

I'm question. Yes, glad that asked you

aspiration going near the in was we that was there -- get you we a internal across comes that it to of that more, to think had weren't about I answer lot maybe did an debate term. and to my

I next I that admit think don't to what is, convey for look year.

focused same rather a say a to on and day I'd with the to plan business they really for nothing the trouble to five servicing the better shelf number. five can came our opportunities if if there continual a caused the business get was in out, it's day think can than I point Yes, to is problem same this some really we years some us get new different there about on fundamentally -- and customer lines but year about driving is progress it, cost competitors our that's than business with to ago. today a

so of for us maybe price direction do just out more I there will cost that's we it's is in on little inflation that system, time, a is cannot and even to that and everybody that are to in good markets, just us to our and of customers it's driving that's we'll just find value, out got do we're not will assure inflation take fair be but drive and that. So cost how out to our really a contracts can given lower move thinking share keep that but it we'll hard in and even it's what their going don't win problem us The help take and are of first. continue is, make our a is the back misrepresent When great to it that; our back helpful, the ways one would thing to going that customers bit how about deflation a we out we that for inflation try lot I in; about want stopping hard, them we take in times. we help ways get how

George Staphos

contracts interpretation come on and more a or is up just different that for is for the apologize hopefully Tony, in have should latter you point as helpful environment, a repition; renewal that inflationary there and that -- I that's I are doing that?

Anthony Allott

every that It's contracts; a give No, a there is within price contract every if year every different interpretation. a the the so deflation year year index, function is concession of out. we our cost takes there

George Staphos

Got it.

Anthony Allott

given I not can't imagine point. So renewal the app that think going I enhance capacity would easy left it's there about situation in to greatly it's not the our that's the to it app be renewal; is imagine, -- we're market,

George Staphos

I and simplistically, that an different X% back the question and from answer volume Okay. the down. on very up and average that's one different number closures was maybe up being year I and quarter I to within a it Brian's the and end question, taking backout X% then a I in recognizing approach and wind mean, earlier. look simple My still X% I take last at the average; think last maybe maybe X%. markets to If very there are that's

secular the market hot-filled your year in the plus, guys, with affecting going view Thanks the your was really is and on your outlook quarter. on last key answer? X% in in what else view or luck good anything there is So the

Anthony Allott

before. Adam think I answered this

get [indiscernible]. you If the

into that you're so then good, So QX, late continues In QX curve; plus pretty break up QX, stops. two. running year, in call everything in a and QX hard you run a good July that a and the year until bad

QX QX than you more and that just correction it's in more will bit good So absorber year. in a in little year the get the you get in upside bad a is of shock so to system if QX you a

George Staphos

margin So that a that this much bigger effect would detrimental also suggest get that actually you in [ph] from comparison? year

Anthony Allott

Yes.

George Staphos

in Okay. quarter. Thank Good it. luck guys, you appreciate the

Anthony Allott

Thank you.

Operator

any conference I'll there appears it Tony additional to questions. back turn And for you are over closing or no the remarks. further

Anthony Allott

more time you Thank end and quarter and the you. to January. Thank little bit on to about at fourth of Great. everyone for look you, we XXXX forward talking you the a

Operator

today's participation. your conclude presentation. for Thank you This

Silgan (SLGN) 25 Oct 172017 Q3 Earnings call transcript