Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 6. Exhibits
Exhibits
EX-31.1
exhibit3119-30x18.htm
EX-31.2
exhibit3129-30x18.htm
EX-32.1
exhibit3219-30x18.htm
EX-32.2
exhibit3229-30x18.htm
Silgan Holdings Earnings 2018-09-30
SLGN 10Q Quarterly Report
Balance Sheet
Income Statement
Cash Flow
10-Q 1 slgn-9302018x10q.htm 10-Q Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 000-22117
SILGAN HOLDINGS INC.
(Exact name of Registrant as specified in its charter)
Delaware
06-1269834
(State or other jurisdiction
(I.R.S. Employer
of incorporation or organization)
Identification No.)
4 Landmark Square
Stamford, Connecticut
06901
(Address of principal executive offices)
(Zip Code)
(203) 975-7110
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes [ X ] No [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ X ]
Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)
Smaller reporting company [ ]
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
As of October 31, 2018, the number of shares outstanding of the Registrant’s common stock, $0.01 par value, was 110,617,896.
Revolving loans and current portion of long-term debt
$
733,404
$
640,390
$
108,789
Trade accounts payable
552,897
487,775
659,629
Accrued payroll and related costs
71,658
69,044
66,257
Accrued liabilities
101,895
122,129
123,602
Total current liabilities
1,459,854
1,319,338
958,277
Long-term debt
2,186,275
2,465,780
2,438,502
Deferred income taxes
279,449
395,181
262,394
Other liabilities
220,704
217,688
220,211
Stockholders’ equity:
Common stock
1,751
1,751
1,751
Paid-in capital
272,301
258,653
262,201
Retained earnings
1,970,875
1,651,760
1,809,845
Accumulated other comprehensive loss
(212,256
)
(170,263
)
(188,973
)
Treasury stock
(1,120,754
)
(1,118,798
)
(1,118,759
)
Total stockholders’ equity
911,917
623,103
766,065
$
5,058,199
$
5,021,090
$
4,645,449
See accompanying notes.
-3-
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
Three Months Ended
Nine Months Ended
Sept. 30, 2018
Sept. 30, 2017
Sept. 30, 2018
Sept. 30, 2017
Net sales
$
1,306,999
$
1,266,930
$
3,378,383
$
3,094,150
Cost of goods sold
1,102,892
1,061,289
2,840,991
2,611,836
Gross profit
204,107
205,641
537,392
482,314
Selling, general and administrative expenses
73,690
75,149
228,691
232,461
Rationalization charges
288
561
1,483
4,485
Other pension and postretirement income
(8,326
)
(8,635
)
(27,536
)
(25,192
)
Income before interest and income taxes
138,455
138,566
334,754
270,560
Interest and other debt expense before loss on
early extinguishment of debt
28,199
30,583
88,602
80,207
Loss on early extinguishment of debt
—
—
2,493
7,052
Interest and other debt expense
28,199
30,583
91,095
87,259
Income before income taxes
110,256
107,983
243,659
183,301
Provision for income taxes
25,517
35,601
57,857
59,762
Net income
$
84,739
$
72,382
$
185,802
$
123,539
Earnings per share:
Basic net income per share
$
0.77
$
0.66
$
1.68
$
1.12
Diluted net income per share
$
0.76
$
0.65
$
1.66
$
1.11
Dividends per share (a)
$
0.10
$
0.09
$
0.30
$
0.27
Weighted average number of shares:
Basic
110,657
110,391
110,599
110,327
Effect of dilutive securities
1,036
1,036
1,010
996
Diluted
111,693
111,427
111,609
111,323
See accompanying notes.
(a) The per share amount of dividends declared on common stock for the nine months ended September 30, 2017 has
been retroactively adjusted for the two-for-one stock split of our issued common stock effected on May 26, 2017.
-4-
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
Three Months Ended
Nine Months Ended
Sept. 30, 2018
Sept. 30, 2017
Sept. 30, 2018
Sept. 30, 2017
Net income
$
84,739
$
72,382
$
185,802
$
123,539
Other comprehensive (loss) income, net of tax:
Changes in net prior service credit and actuarial losses
807
558
2,441
1,816
Change in fair value of derivatives
476
(51
)
673
(526
)
Foreign currency translation
(4,576
)
14,369
(26,397
)
52,303
Other comprehensive (loss) income
(3,293
)
14,876
(23,283
)
53,593
Comprehensive income
$
81,446
$
87,258
$
162,519
$
177,132
See accompanying notes.
-5-
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2018 and 2017
(Dollars in thousands)
(Unaudited)
2018
2017
Cash flows provided by (used in) operating activities:
Net income
$
185,802
$
123,539
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization
146,246
129,734
Rationalization charges
1,483
4,485
Stock compensation expense
11,162
11,052
Loss on early extinguishment of debt
2,493
7,052
Other changes that provided (used) cash, net of effects from acquisition:
Trade accounts receivable, net
(271,636
)
(285,901
)
Inventories
(32,743
)
(2,895
)
Trade accounts payable
(11,185
)
1,725
Accrued liabilities
(11,227
)
16,003
Other, net
(7,304
)
(9,247
)
Net cash provided by (used in) operating activities
13,091
(4,453
)
Cash flows provided by (used in) investing activities:
Purchase of business, net of cash acquired
—
(1,028,729
)
Capital expenditures
(134,636
)
(124,163
)
Other, net
236
539
Net cash used in investing activities
(134,400
)
(1,152,353
)
Cash flows provided by (used in) financing activities:
Borrowings under revolving loans
923,639
1,108,208
Repayments under revolving loans
(266,477
)
(680,986
)
Proceeds from issuance of long-term debt
—
1,789,200
Repayments of long-term debt
(286,200
)
(755,037
)
Changes in outstanding checks - principally vendors
(87,795
)
(78,944
)
Dividends paid on common stock
(33,843
)
(30,373
)
Debt issuance costs
(2,866
)
(16,643
)
Repurchase of common stock under stock plan
(3,057
)
(4,123
)
Net cash provided by financing activities
243,401
1,331,302
Effect of exchange rate changes on cash and cash equivalents
(4,256
)
—
Cash and cash equivalents:
Net increase
117,836
174,496
Balance at beginning of year
53,533
24,690
Balance at end of period
$
171,369
$
199,186
Interest paid, net
$
104,040
$
78,528
Income taxes paid, net
39,400
50,226
See accompanying notes.
-6-
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
For the nine months ended September 30, 2018 and 2017
(Dollars and shares in thousands)
(Unaudited)
Accumulated Other Comprehensive Loss
Common Stock
Total Stockholders’ Equity
Shares Outstanding
Par Value
Paid-in Capital
Retained Earnings
Treasury Stock
Balance at December 31, 2016
55,051
$
876
$
249,763
$
1,558,594
$
(223,856
)
$
(1,115,962
)
$
469,415
Net income
—
—
—
123,539
—
—
123,539
Other comprehensive income
—
—
—
—
53,593
—
53,593
Dividends declared on common stock
—
—
—
(30,373
)
—
—
(30,373
)
Stock compensation expense
—
—
11,052
—
—
—
11,052
Net issuance of treasury stock for vested restricted stock units
180
—
(1,287
)
—
—
(2,836
)
(4,123
)
Two-for-one stock split
55,142
875
(875
)
—
—
—
—
Balance at September 30, 2017
110,373
$
1,751
$
258,653
$
1,651,760
$
(170,263
)
$
(1,118,798
)
$
623,103
Balance at December 31, 2017
110,385
$
1,751
$
262,201
$
1,809,845
$
(188,973
)
$
(1,118,759
)
$
766,065
Adoption of accounting standards update for revenue recognition
—
—
—
9,061
—
—
9,061
Net income
—
—
—
185,802
—
—
185,802
Other comprehensive loss
—
—
—
—
(23,283
)
—
(23,283
)
Dividends declared on common stock
—
—
—
(33,833
)
—
—
(33,833
)
Stock compensation expense
—
—
11,162
—
—
—
11,162
Net issuance of treasury stock for vested restricted stock units
233
—
(1,062
)
—
—
(1,995
)
(3,057
)
Balance at September 30, 2018
110,618
$
1,751
$
272,301
$
1,970,875
$
(212,256
)
$
(1,120,754
)
$
911,917
See accompanying notes.
-7-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)
Note 1. Significant Accounting Policies
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of Silgan Holdings Inc., or Silgan, have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. The results of operations for any interim period are not necessarily indicative of the results of operations for the full year.
The Condensed Consolidated Balance Sheet at December 31, 2017 has been derived from our audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.
You should read the accompanying condensed consolidated financial statements in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017.
Goodwill and Other Intangible Assets. We review goodwill and other indefinite-lived intangible assets for impairment as of July 1 of each year and more frequently if circumstances indicate a possible impairment. We determined that our goodwill and other indefinite-lived intangible assets were not impaired in our annual 2018 assessment performed during the third quarter.
Recently Adopted Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board, or FASB, issued an accounting standards update, or ASU, that amends the guidance for revenue recognition. This amendment contains principles that require an entity to recognize revenue to depict the transfer of promised goods and services to customers at an amount that an entity expects to be entitled to in exchange for those promised goods or services. We adopted this amendment on January 1, 2018, using the modified retrospective method for all contracts for which performance was not completed as of January 1, 2018. Results for the reporting period beginning January 1, 2018 are presented under the new guidance, while prior period amounts are not adjusted. The adoption of this amendment required us to accelerate the recognition of revenue prior to shipment to certain customers in cases where we produce promised goods with no alternative use to us and for which we have an enforceable right of payment for production completed. As a result of the adoption of this amendment, we increased trade accounts receivable, net by $69.4 million, decreased inventories by $56.6 million, increased accrued liabilities by $0.9 million and increased long-term deferred income tax liabilities by $2.8 million, resulting in a net increase to retained earnings of $9.1 million, all as of January 1, 2018. The adoption of this amendment did not have a material impact on our financial position, results of operations or cash flows. See Note 2 for further information.
In August 2016, the FASB issued an ASU that provides guidance for cash flow classification for certain cash receipts and cash payments to address diversity in practice in the manner in which items are classified on the statement of cash flows as either operating, investing or financing activities. We have adopted this amendment as of January 1, 2018 using the retrospective approach. The adoption of this amendment did not have a material impact on our statement of cash flows.
In March 2017, the FASB issued an ASU that amends the presentation of net periodic pension cost and net periodic postretirement benefit cost. This amendment requires an entity to disaggregate the service cost component from the other components of net periodic benefit cost, to report the service cost component in the same line item as other compensation costs and to report the other components of net periodic benefit cost (which include interest cost, expected return on plan assets, amortization of prior service cost or credit and actuarial gains and losses) separately. In addition, capitalization of net periodic benefit cost in assets is limited to the service cost component. We have adopted this amendment as of January 1, 2018. As a result of separately reporting the other components of net periodic benefit cost, we retrospectively increased cost of goods sold by $6.9 million and $20.0 million, increased selling, general and administrative expenses by $1.7 million and $5.2 million and reported other pension and postretirement income of $8.6 million and $25.2 million in our Condensed Consolidated Statement of Income for the three and nine months ended September 30, 2017, respectively, based on amounts previously included in net periodic benefit costs for retirement benefits as disclosed in Note 10. The adoption of this amendment did not have a material impact on our financial position, results of operations or cash flows.
Recently Issued Accounting Pronouncements. In February 2016, the FASB issued an ASU that amends existing guidance for certain leases by lessees. This amendment will require an entity to recognize assets and liabilities on the balance sheet for the rights
-8-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)
and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. In addition, this amendment clarifies the presentation requirements of the effects of leases in the statement of income and statement of cash flows. We will adopt this amendment on January 1, 2019. In adopting this amendment, we expect to elect the transition method which will allow us to recognize the effects of applying this amendment as a cumulative effect to retained earnings as of January 1, 2019 and not restate comparative periods for the effects of this amendment. We are currently evaluating the impact of this amendment on our financial position, results of operations and cash flows.
Note 2. Revenue
Our revenues are primarily derived from the sale of rigid packaging products to customers. We recognize revenue at the amount we expect to be entitled to in exchange for promised goods for which we have transferred control to customers. If the consideration agreed to in a contract includes a variable amount, we estimate the amount of consideration we expect to be entitled to in exchange for transferring the promised goods to the customer. Generally, revenue is recognized at a point in time for standard promised goods at the time of shipment when title and risk of loss pass to the customer, and revenue is recognized over time in cases where we produce promised goods with no alternative use to us and for which we have an enforceable right of payment for production completed. The production cycle for customer contracts subject to over time recognition is generally completed in less than one month. Due to the short-term duration of our production cycle, we have elected the practical expedient permitting us to exclude disclosure regarding our performance obligations with respect to outstanding purchase orders. We have elected to treat shipping and handling costs after the control of goods have been transferred to the customer as a fulfillment cost. Sales and similar taxes that are imposed on our sales and collected from customers are excluded from revenues.
The following tables present our revenues disaggregated by reportable business segment and geography as they best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
Revenues by business segment were as follows:
Three Months Ended
Nine Months Ended
Sept. 30, 2018
Sept. 30, 2017
Sept. 30, 2018
Sept. 30, 2017
(Dollars in thousands)
Metal containers
$
797,768
$
772,382
$
1,808,585
$
1,768,333
Closures
360,816
357,343
1,109,924
904,112
Plastics
148,415
137,205
459,874
421,705
$
1,306,999
$
1,266,930
$
3,378,383
$
3,094,150
Revenues by geography were as follows:
Three Months Ended
Nine Months Ended
Sept. 30, 2018
Sept. 30, 2017
Sept. 30, 2018
Sept. 30, 2017
(Dollars in thousands)
North America
$
1,056,099
$
1,011,573
$
2,651,225
$
2,488,620
Europe and other
250,900
255,357
727,158
605,530
$
1,306,999
$
1,266,930
$
3,378,383
$
3,094,150
Our contracts generally include standard commercial payment terms generally acceptable in each region. We do not provide financing with extended payment terms beyond generally standard commercial payment terms for the applicable industry. We have no significant obligations for refunds, warranties or similar obligations.
-9-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)
Trade accounts receivable, net are shown separately on our Condensed Consolidated Balance Sheet. Contract assets are the result of the timing of revenue recognition, billings and cash collections. Our contract assets primarily consist of unbilled accounts receivable related to over time revenue recognition and were $77.2 million as of September 30, 2018. Unbilled receivables are included in trade accounts receivable, net on our Condensed Consolidated Balance Sheet. Had we not adopted the amended guidance for revenue recognition on January 1, 2018, our trade accounts receivable, net would have been $706.1 million and our inventories would have been $753.3 million as of September 30, 2018.
Note 3. Acquisition
On April 6, 2017, we acquired the specialty closures and dispensing systems operations of WestRock Company, now operating under the name Silgan Dispensing Systems, or SDS. During the three months ended March 31, 2018, we finalized our purchase price allocation. There were no material changes to the previously recorded fair values of assets acquired and liabilities assumed.
Note 4. Rationalization Charges
We continually evaluate cost reduction opportunities across each of our businesses, including rationalizations of our existing facilities through plant closings and downsizings. We use a disciplined approach to identify opportunities that generate attractive cash returns. Rationalization charges were $0.3 million and $0.6 million for the three months ended September 30, 2018 and 2017, respectively, and $1.5 million and $4.5 million for the nine months ended September 30, 2018 and 2017, respectively. Under our rationalization plans, we made cash payments of $1.8 million and $2.8 million for the nine months ended September 30, 2018 and 2017, respectively.
Rationalization reserves as of September 30, 2018 were recorded in our Condensed Consolidated Balance Sheets as accrued liabilities and other liabilities of $0.7 million and $1.0 million, respectively. Remaining expenses for our rationalization plans of $1.1 million are expected primarily within the next twelve months. Remaining cash expenditures for our rationalization plans of $2.8 million are expected through 2023.
-10-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)
Note 5. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss is reported in our Condensed Consolidated Statements of Stockholders’ Equity. Amounts included in accumulated other comprehensive loss, net of tax, were as follows:
Unrecognized Net Defined Benefit Plan Costs
Change in Fair Value of Derivatives
Foreign Currency Translation
Total
(Dollars in thousands)
Balance at December 31, 2017
$
(104,822
)
$
(89
)
$
(84,062
)
$
(188,973
)
Other comprehensive loss before reclassifications
(917
)
663
(26,397
)
(26,651
)
Amounts reclassified from accumulated other
comprehensive loss
3,358
10
—
3,368
Other comprehensive loss
2,441
673
(26,397
)
(23,283
)
Balance at September 30, 2018
$
(102,381
)
$
584
$
(110,459
)
$
(212,256
)
The amounts reclassified to earnings from the unrecognized net defined benefit plan costs component of accumulated other comprehensive loss for the three and nine months ended September 30, 2018 were net (losses) of $(2.3) million and $(4.4) million, respectively, excluding income tax benefits of $0.6 million and $1.1 million, respectively. For the three and nine months ended September 30, 2018, these net (losses) consisted of amortization of net actuarial (losses) of $(1.7) million and $(5.0) million and amortization of net prior service (cost) credit of $(0.6) million and $0.6 million, respectively. Amortization of net actuarial losses and net prior service credit was recorded in other pension and postretirement income in our Condensed Consolidated Statements of Income. See Note 10 for further information.
The amounts reclassified to earnings from the change in fair value of derivatives component of accumulated other comprehensive loss for the three and nine months ended September 30, 2018 were not significant.
Other comprehensive income before reclassifications related to foreign currency translation for the three and nine months ended September 30, 2018 consisted of (i) foreign currency (losses) related to translation of quarter end financial statements of foreign
subsidiaries utilizing a functional currency other than the U.S. dollar of $(7.5) million and $(36.9) million, respectively (ii) foreign currency gains related to intra-entity foreign currency transactions that are of a long-term investment nature of $1.1 million and $1.3 million, respectively, and (iii) foreign currency gains related to our net investment hedges of $2.4 million and $12.0 million, respectively, excluding income tax (provisions) of $(0.6) million and $(2.8) million, respectively. See Note 8 for further discussion.
-11-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)
Note 6. Inventories
Inventories consisted of the following:
Sept. 30,
2018
Sept. 30,
2017
Dec. 31,
2017
(Dollars in thousands)
Raw materials
$
250,051
$
211,959
$
233,410
Work-in-process
125,336
132,071
124,396
Finished goods
384,815
415,645
433,937
Other
12,999
13,128
12,370
773,201
772,803
804,113
Adjustment to value inventory
at cost on the LIFO method
(82,823
)
(68,419
)
(82,823
)
$
690,378
$
704,384
$
721,290
Note 7. Long-Term Debt
Long-term debt consisted of the following:
Sept. 30,
2018
Sept. 30,
2017
Dec. 31, 2017
(Dollars in thousands)
Bank debt
Bank revolving loans
$
698,000
$
598,751
$
—
U.S. term loans
800,000
800,000
800,000
Canadian term loans
23,335
27,365
27,147
Other foreign bank revolving and term loans
36,143
49,596
76,798
Total bank debt
1,557,478
1,475,712
903,945
5% Senior Notes
—
280,000
280,000
5½% Senior Notes
300,000
300,000
300,000
4¾% Senior Notes
300,000
300,000
300,000
3¼% Senior Notes
754,260
767,910
780,325
Other obligations
21,950
—
—
Total debt - principal
2,933,688
3,123,622
2,564,270
Less unamortized debt issuance costs
14,009
17,452
16,979
Total debt
2,919,679
3,106,170
2,547,291
Less current portion
733,404
640,390
108,789
$
2,186,275
$
2,465,780
$
2,438,502
At September 30, 2018, the current portion of long-term debt consisted of $698.0 million of bank revolving loans under our amended and restated senior secured credit facility and $35.4 million of other foreign bank revolving and term loans and other obligations.
On April 16, 2018, we redeemed all remaining outstanding 5% Senior Notes due 2020, or the 5% Notes, ($280.0 million aggregate principal amount) at a redemption price of 100 percent of their principal amount plus accrued and unpaid interest up to the redemption date. We funded this redemption with revolving loan borrowings under our amended and restated senior secured credit facility and cash on hand.
-12-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)
On May 30, 2018, we and certain of our wholly owned subsidiaries entered into a First Amendment to Amended and Restated Credit Agreement, or the First Amendment, with the Lenders (as defined therein) and Wells Fargo National Association, as Administrative Agent. The First Amendment amended our amended and restated senior secured credit facility dated as of March 24, 2017, or the Credit Agreement.
Pursuant to the First Amendment, the date until which revolving loans under the Credit Agreement generally may be borrowed, repaid and reborrowed from time to time was extended from March 24, 2022 to May 30, 2023. The First Amendment also extended the maturity date of the term loans under the Credit Agreement from March 24, 2023 to May 30, 2024 and provides that the term loans under the Credit Agreement are payable in installments as follows (expressed as a percentage of the original principal amount of the applicable term loan outstanding on the date that it is borrowed), with the remaining outstanding principal amounts to be repaid on the maturity date of the term loans:
Date
Percentage
December 31, 2019
5.0
%
December 31, 2020
10.0
%
December 31, 2021
10.0
%
December 31, 2022
10.0
%
December 31, 2023
10.0
%
In addition, pursuant to the First Amendment, during the period from May 30, 2018 through June 30, 2018, the applicable margin for term loans and the revolving loans under the Credit Agreement was (i) with respect to base rate and Canadian prime rate loans, 0.50 percent and (ii) with respect to Eurodollar Rate, Euro Rate and CDOR Rate loans, 1.50 percent. The applicable margin for term loans and revolving loans under the Credit Agreement will be reset quarterly based on our Total Net Leverage Ratio as provided in the Credit Agreement, beginning no sooner than July 1, 2018 (with respect to the quarterly period ended March 31, 2018). Pursuant to the First Amendment, the maximum applicable margin was decreased from 1.00 percent to 0.50 percent with respect to base rate and Canadian prime rate loans and from 2.00 percent to 1.50 percent with respect to Eurodollar Rate, Euro Rate and CDOR Rate loans.
The applicable commitment fee payable by revolving borrowers on the daily average unused portion of the commitment in respect of revolving loans under the Credit Agreement was 0.30 percent per annum for the period from May 30, 2018 through June 30, 2018. Pursuant to the First Amendment, the maximum applicable commitment fee was decreased from 0.35 percent to 0.30 percent and will be reset quarterly based upon our Total Net Leverage Ratio as provided in the Credit Agreement, beginning no sooner than July 1, 2018 (with respect to the quarterly period ended March 31, 2018).
Additionally, the First Amendment includes other changes to the Credit Agreement, including certain changes which provide us with additional flexibility to pursue our strategic initiatives.
As a result of the redemption of the remaining outstanding 5% Notes and the First Amendment, we recorded a pre-tax charge for the loss on early extinguishment of debt of $2.5 million during the second quarter of 2018.
-13-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)
Note 8. Financial Instruments
The financial instruments recorded in our Condensed Consolidated Balance Sheets include cash and cash equivalents, trade accounts receivable, trade accounts payable, debt obligations and swap agreements. Due to their short-term maturity, the carrying amounts of trade accounts receivable and trade accounts payable approximate their fair market values. The following table summarizes the carrying amounts and estimated fair values of our other financial instruments at September 30, 2018:
Carrying
Amount
Fair
Value
(Dollars in thousands)
Assets:
Cash and cash equivalents
$
171,369
$
171,369
Liabilities:
Bank debt
$
1,557,478
$
1,557,478
5½% Senior Notes
300,000
304,089
4¾% Senior Notes
300,000
287,982
3¼% Senior Notes
754,260
779,769
Fair Value Measurements
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). GAAP classifies the inputs used to measure fair value into a hierarchy consisting of three levels. Level 1 inputs represent unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs represent unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability. Level 3 inputs represent unobservable inputs for the asset or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Financial Instruments Measured at Fair Value
The financial assets and liabilities that were measured on a recurring basis at September 30, 2018 consisted of our cash and cash equivalents and derivative instruments. We measured the fair value of cash and cash equivalents using Level 1 inputs. We measured the fair value of our derivative instruments using the income approach. The fair value of our derivative instruments reflects the estimated amounts that we would pay or receive based on the present value of the expected cash flows derived from market interest rates and prices. As such, these derivative instruments were classified within Level 2.
Financial Instruments Not Measured at Fair Value
Our bank debt, 5½% Senior Notes, 4¾% Senior Notes and 3¼% Senior Notes were recorded at historical amounts in our Condensed Consolidated Balance Sheets, as we have not elected to measure them at fair value. We measured the fair value of our variable rate bank debt using the market approach based on Level 2 inputs. Fair values of the 5½% Senior Notes, 4¾% Senior Notes and 3¼% Senior Notes were estimated based on quoted market prices, a Level 1 input.
Derivative Instruments and Hedging Activities
Our derivative financial instruments were recorded in the Condensed Consolidated Balance Sheets at their fair values. Changes in fair values of derivatives are recorded in each period in earnings or comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction.
-14-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)
We utilize certain derivative financial instruments to manage a portion of our interest rate and natural gas cost exposures. We generally limit our use of derivative financial instruments to interest rate and natural gas swap agreements. We do not engage in trading or other speculative uses of these financial instruments. For a financial instrument to qualify as a hedge, we must be exposed to interest rate or price risk, and the financial instrument must reduce the exposure and be designated as a hedge. Financial instruments qualifying for hedge accounting must maintain a high correlation between the hedging instrument and the item being hedged, both at inception and throughout the hedged period.
We utilize certain internal hedging strategies to minimize our foreign currency exchange rate risk. Net investment hedges that qualify for hedge accounting result in the recognition of foreign currency gains or losses, net of tax, in accumulated other comprehensive loss. We generally do not utilize external derivative financial instruments to manage our foreign currency exchange rate risk.
Interest Rate Swap Agreements
We have entered into two U.S. dollar interest rate swap agreements, each for $50.0 million notional principal amount, to manage a portion of our exposure to interest rate fluctuations. These agreements have a fixed rate of 2.878 percent, become effective on March 29, 2019 and mature on March 24, 2023. The difference between amounts to be paid or received on our interest rate swap agreements will be recorded in interest and other debt expense in our Condensed Consolidated Statements of Income. These agreements are with financial institutions which are expected to fully perform under the terms thereof. The total fair value of our interest rate swap agreements in effect at September 30, 2018 was not significant.
Natural Gas Swap Agreements
We have entered into natural gas swap agreements with a major financial institution to manage a portion of our exposure to fluctuations in natural gas prices. The difference between amounts to be paid or received on our natural gas swap agreements is recorded in cost of goods sold in our Condensed Consolidated Statements of Income and was not significant for the three and nine months ended September 30, 2018. These agreements are with financial institutions which are expected to fully perform under the terms thereof. The total fair value of our natural gas swap agreements in effect at September 30, 2018 was not significant.
Foreign Currency Exchange Rate Risk
In an effort to minimize foreign currency exchange rate risk, we have financed acquisitions of foreign operations primarily with borrowings denominated in Euros and Canadian dollars. In addition, where available, we have borrowed funds in local currency or implemented certain internal hedging strategies to minimize our foreign currency exchange rate risk related to foreign operations. We have designated the 3¼% Senior Notes, which are Euro denominated, as net investment hedges. Foreign currency gains related to our net investment hedges included in accumulated other comprehensive loss for the three and nine months ended September 30, 2018 were $2.4 million and $12.0 million, respectively.
-15-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)
Note 9. Commitments and Contingencies
A competition authority in Germany commenced an antitrust investigation in 2015 involving the industry association for metal packaging in Germany and its members, including our metal container and closures subsidiaries in Germany. At the end of April 2018, the European Commission commenced an antitrust investigation involving the metal packaging industry in Europe including our metal container and closures subsidiaries, which should effectively close out the investigation in Germany. Given the early stage, we cannot reasonably assess what actions may result from these investigations or estimate what costs we may incur as a result thereof.
We are a party to other legal proceedings, contract disputes and claims arising in the ordinary course of our business. We are not a party to, and none of our properties are subject to, any pending legal proceedings which could have a material adverse effect on our business or financial condition.
Note 10. Retirement Benefits
The components of the net periodic pension benefit credit were as follows:
Three Months Ended
Nine Months Ended
Sept. 30, 2018
Sept. 30, 2017
Sept. 30, 2018
Sept. 30, 2017
(Dollars in thousands)
Service cost
$
3,411
$
3,532
$
10,842
$
9,967
Interest cost
6,348
6,482
18,953
19,114
Expected return on plan assets
(17,137
)
(15,832
)
(51,382
)
(47,258
)
Amortization of prior service cost
34
75
103
235
Amortization of actuarial losses
1,877
1,501
5,450
5,208
Net periodic benefit credit
$
(5,467
)
$
(4,242
)
$
(16,034
)
$
(12,734
)
The components of the net periodic other postretirement benefit cost (credit) were as follows:
Three Months Ended
Nine Months Ended
Sept. 30, 2018
Sept. 30, 2017
Sept. 30, 2018
Sept. 30, 2017
(Dollars in thousands)
Service cost
$
15
$
9
$
78
$
79
Interest cost
158
168
483
520
Amortization of prior service cost (credit)
561
(857
)
(738
)
(2,564
)
Amortization of actuarial gains
(167
)
(172
)
(405
)
(447
)
Net periodic benefit cost (credit)
$
567
$
(852
)
$
(582
)
$
(2,412
)
-16-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)
Note 11. Income Taxes
Silgan and its subsidiaries file U.S. Federal income tax returns, as well as income tax returns in various states and foreign jurisdictions. We have been accepted into the Compliance Assurance Program for the 2017 and 2018 tax years which provides for the review by the Internal Revenue Service, or IRS, of tax matters relating to our tax return prior to filing. In the next twelve months, we expect that our reserve for unrecognized tax benefits will decrease by approximately $4.0 million primarily related to tax attributes acquired from and expenses related to certain acquisitions, as we anticipate the expiration of the applicable statutes of limitation with respect to certain tax matters and resolving certain other outstanding tax matters with the IRS.
In December 2017, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118, which provides guidance for the application of GAAP as it pertains to accounting for income taxes and allows us to record provisional amounts pertaining to the enacted legislation in the United States commonly referred to as the Tax Cuts and Jobs Act, or the 2017 Tax Act, during a measurement period ending in December 2018. For the three and nine months ended September 30, 2018, we did not have any significant adjustments to our provisional amounts. Additional work is necessary to complete the analysis of open items, including our deferred tax assets and liabilities and our historical foreign earnings. Any subsequent adjustment to the provisional amounts will be recorded in current tax expense in the fourth quarter of 2018.
Note 12. Capital Stock and Treasury Stock
On June 11, 2018, our stockholders approved an increase in the number of authorized shares of our common stock from 200,000,000 to 400,000,000. Accordingly, on June 11, 2018 we filed a Certificate of Amendment to our Amended and Restated Certificate of Incorporation increasing the total number of shares of capital which we have authority to issue to 410,000,000 shares, consisting of 400,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value of $0.01 per share.
On October 17, 2016, our Board of Directors authorized the repurchase by us of up to an aggregate of $300.0 million of our common stock by various means from time to time through and including December 31, 2021, of which we had approximately $129.4 million remaining under this authorization for the repurchase of our common stock at September 30, 2018. We did not repurchase any shares of our common stock under this authorization during the nine months ended September 30, 2018.
During the first nine months of 2018, we issued 339,972 treasury shares which had an average cost of $3.12 per share for restricted stock units that vested during the period. In accordance with the Silgan Holdings Inc. Amended and Restated 2004 Stock Incentive Plan, we repurchased 107,420 shares of our common stock at an average cost of $28.46 to satisfy minimum employee withholding tax requirements resulting from the vesting of such restricted stock units.
We account for treasury shares using the first-in, first-out (FIFO) cost method. As of September 30, 2018, 64,494,600 shares of our common stock were held in treasury.
Note 13. Stock-Based Compensation
We currently have one stock-based compensation plan in effect under which we have issued options and restricted stock units to our officers, other key employees and outside directors. During the first nine months of 2018, 374,810 restricted stock units were granted to certain of our officers, other key employees and outside directors. The fair value of these restricted stock units at the grant date was $10.7 million, which is being amortized ratably over the respective vesting period from the grant date.
-17-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)
Note 14. Business Segment Information
Reportable business segment information for the three and nine months ended September 30 was as follows:
Metal
Containers
Closures
Plastic
Containers
Corporate
Total
(Dollars in thousands)
Three Months Ended September 30, 2018
Net sales
$
797,768
$
360,816
$
148,415
$
—
$
1,306,999
Depreciation and amortization(1)
19,823
18,378
9,171
43
47,415
Rationalization charges
72
111
105
—
288
Segment income
86,928
47,349
8,446
(4,268
)
138,455
Three Months Ended September 30, 2017
Net sales
$
772,382
$
357,343
$
137,205
$
—
$
1,266,930
Depreciation and amortization(1)
19,250
17,457
8,636
22
45,365
Rationalization charges
326
134
101
—
561
Segment income(2)
92,222
45,322
6,444
(5,422
)
138,566
Nine Months Ended September 30, 2018
Net sales
$
1,808,585
$
1,109,924
$
459,874
$
—
$
3,378,383
Depreciation and amortization(1)
60,500
55,786
26,975
107
143,368
Rationalization charges
812
150
521
—
1,483
Segment income
172,268
143,277
32,687
(13,478
)
334,754
Nine Months Ended September 30, 2017
Net sales
$
1,768,333
$
904,112
$
421,705
$
—
$
3,094,150
Depreciation and amortization(1)
57,172
43,638
25,644
68
126,522
Rationalization charges
3,288
535
662
—
4,485
Segment income(2)
185,525
102,947
19,944
(37,856
)
270,560
_____________
(1)
Depreciation and amortization excludes amortization of debt issuance costs of $0.9 million and $1.0 million for the three months ended September 30, 2018 and 2017, respectively, and $2.9 million and $3.2 million for the nine months ended September 30, 2018 and 2017, respectively.
(2)
Segment income for Metal Containers includes a $3.0 million charge for the nine months ended September 30, 2017 related to the resolution of a past non-commercial legal dispute. Segment income for Corporate includes costs attributed to announced acquisitions of $0.8 million and $23.8 million for the three and nine months ended September 30, 2017, respectively.
-18-
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)
Total segment income is reconciled to income before income taxes as follows:
Three Months Ended
Nine Months Ended
Sept. 30, 2018
Sept. 30, 2017
Sept. 30, 2018
Sept. 30, 2017
(Dollars in thousands)
Total segment income
$
138,455
$
138,566
$
334,754
$
270,560
Interest and other debt expense
28,199
30,583
91,095
87,259
Income before income taxes
$
110,256
$
107,983
$
243,659
$
183,301
Sales and segment income of our metal container business and part of our closures business are dependent, in part, upon fruit and vegetable harvests. The size and quality of these harvests varies from year to year, depending in large part upon the weather conditions in applicable regions. Because of the seasonality of the harvests, we have historically experienced higher unit sales volume in the third quarter of our fiscal year and generated a disproportionate amount of our annual segment income during that quarter.
-19-
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statements included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q that 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 Securities Exchange Act of 1934, as amended. Such forward-looking statements are made based upon management’s expectations and beliefs concerning future events impacting us and therefore involve a number of uncertainties and risks, including, but not limited to, those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and in our other filings with the Securities and Exchange Commission. As a result, the actual results of our operations or our financial condition could differ materially from those expressed or implied in these forward-looking statements.
General
We are a leading manufacturer of rigid packaging for consumer goods products. We currently produce steel and aluminum containers for human and pet food and general line products; metal and plastic closures and dispensing systems for food, beverage, health care, garden, personal care, home and beauty products; and custom designed plastic containers for personal care, food, health care, pharmaceutical, household and industrial chemical, pet care, agricultural, automotive and marine chemical products. We are a leading manufacturer of metal containers in North America and Europe, a leading worldwide manufacturer of metal and plastic closures and dispensing systems and a leading manufacturer of plastic containers in North America for a variety of markets, including the personal care, food, health care, household and industrial chemical markets.
Our objective is to increase shareholder value by efficiently deploying capital and management resources to grow our business, reduce operating costs and build sustainable competitive positions, or franchises, and to complete acquisitions that generate attractive cash returns. We have grown our net sales and income from operations largely through acquisitions but also through internal growth, and we continue to evaluate acquisition opportunities in the consumer goods packaging market. If acquisition opportunities are not identified over a longer period of time, we may use our cash flow to repay debt, repurchase shares of our common stock or increase dividends to our stockholders or for other permitted purposes.
-20-
RESULTS OF OPERATIONS
The following table sets forth certain unaudited income statement data expressed as a percentage of net sales for the periods presented:
Three Months Ended
Nine Months Ended
Sept. 30, 2018
Sept. 30, 2017
Sept. 30, 2018
Sept. 30, 2017
Net sales
Metal containers
61.0
%
61.0
%
53.5
%
57.2
%
Closures
27.6
28.2
32.9
29.2
Plastic containers
11.4
10.8
13.6
13.6
Consolidated
100.0
100.0
100.0
100.0
Cost of goods sold
84.4
83.8
84.1
84.4
Gross profit
15.6
16.2
15.9
15.6
Selling, general and administrative expenses
5.6
5.9
6.8
7.5
Rationalization charges
—
0.1
—
0.2
Other pension and postretirement income
(0.6
)
(0.7
)
(0.8
)
(0.8
)
Income before interest and income taxes
10.6
10.9
9.9
8.7
Interest and other debt expense
2.2
2.4
2.7
2.8
Income before income taxes
8.4
8.5
7.2
5.9
Provision for income taxes
1.9
2.8
1.7
1.9
Net income
6.5
%
5.7
%
5.5
%
4.0
%
Summary unaudited results of operations for the periods presented are provided below.
Three Months Ended
Nine Months Ended
Sept. 30, 2018
Sept. 30, 2017
Sept. 30, 2018
Sept. 30, 2017
(Dollars in millions)
Net sales
Metal containers
$
797.8
$
772.4
$
1,808.6
$
1,768.3
Closures
360.8
357.3
1,109.9
904.1
Plastic containers
148.4
137.2
459.9
421.7
Consolidated
$
1,307.0
$
1,266.9
$
3,378.4
$
3,094.1
Segment income
Metal containers (1)
$
86.9
$
92.2
$
172.3
$
185.5
Closures (2)
47.3
45.3
143.3
103.0
Plastic containers (3)
8.5
6.5
32.7
20.0
Corporate (4)
(4.2
)
(5.4
)
(13.5
)
(37.9
)
Consolidated
$
138.5
$
138.6
$
334.8
$
270.6
(1) Includes rationalization charges of $0.1 million and $0.4 million for the three months ended September 30, 2018 and 2017, respectively, and $0.8 million and $3.3 million for the nine months ended September 30, 2018 and 2017, respectively. Includes a $3.0 million charge related to the resolution of a past non-commercial legal dispute for the nine months ended September 30, 2017.
(2) Includes rationalization charges of $0.1 million for each of the three months ended September 30, 2018 and 2017 and $0.2 million and $0.5 million for the nine months ended September 30, 2018 and 2017, respectively.
(3) Includes rationalization charges of $0.1 million for each of the three months ended September 30, 2018 and 2017 and $0.5 million and $0.7 million for the nine months ending September 30, 2018 and 2017, respectively.
(4) Includes costs attributed to announced acquisitions of $0.8 million and $23.8 million for the three and nine months ended September 30, 2017, respectively.
-21-
Three Months Ended September 30, 2018 Compared with Three Months Ended September 30, 2017
Overview. Consolidated net sales were $1.31 billion in the third quarter of 2018, representing a 3.2 percent increase as compared to the third quarter of 2017 primarily due to the pass through of higher raw material costs in each of our businesses, higher volumes in the plastic container business and a more favorable mix of products sold in the metal container business, partially offset by lower unit volumes in the metal container business and the impact of unfavorable foreign currency translation. Income before interest and income taxes for the third quarter of 2018 was essentially flat as compared to the same period in 2017, with higher volumes and lower manufacturing costs in the plastic container business, a more favorable mix of products sold in the metal container and closures businesses, the favorable impact in the metal container business of the contractual pass through to customers of indexed inflation as compared to the unfavorable impact in the prior year period from the contractual pass through of indexed deflation, lower costs in the closures business due largely to synergies realized from the SDS acquisition and foreign currency transaction losses in the prior year period in the metal container business being offset by lower unit volumes in the metal container business, higher freight expense, the unfavorable impact from the lagged pass through to customers of higher resin costs in the plastic container and closures businesses and costs associated with the start-up of the new manufacturing facility in the plastic container business. Results for the third quarters of 2018 and 2017 included rationalization charges of $0.3 million and $0.6 million, respectively. Results for the third quarters of 2018 and 2017 also included other pension and postretirement income of $8.3 million and $8.6 million, respectively. Results for the third quarter of 2017 also included costs attributed to announced acquisitions of $0.8 million. Net income for the third quarter of 2018 was $84.7 million as compared to $72.4 million for the same period in 2017. Net income per diluted share for the third quarter of 2018 was $0.76 as compared to $0.65 for the same period in 2017.
Net Sales. The $40.1 million increase in consolidated net sales in the third quarter of 2018 as compared to the third quarter of 2017 was the result of higher net sales across all of our businesses.
Net sales for the metal container business increased $25.4 million, or 3.3 percent, in the third quarter of 2018 as compared to the same period in 2017. This increase was primarily the result of the pass through of higher raw material and other manufacturing costs and a more favorable mix of products sold, partially offset by lower unit volumes of approximately six percent and the impact of unfavorable foreign currency translation of approximately $1.0 million. The volume decline was primarily the result of the continued impact from inventory adjustments at a seasonal customer, a customer plant shutdown in the fruit market and the competitive loss of a smaller, lower margin customer as well as a decline in soup volume.
Net sales for the closures business increased $3.5 million, or 1.0 percent, in the third quarter of 2018 as compared to the same period in 2017. This increase was primarily the result of the pass through of higher raw material costs, partially offset by the impact of unfavorable foreign currency translation of approximately $1.0 million.
Net sales for the plastic container business increased $11.2 million, or 8.2 percent, in the third quarter of 2018 as compared to the same period in 2017. This increase was principally due to the pass through of higher raw material costs and higher volumes of approximately three percent, partially offset by the impact of unfavorable foreign currency translation of approximately $1.0 million.
Gross Profit. Gross profit margin decreased 0.6 percentage points to 15.6 percent in the third quarter of 2018 as compared to the same period in 2017 for the reasons discussed below in "Income before Interest and Income Taxes".
Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of consolidated net sales decreased 0.3 percentage points to 5.6 percent for the third quarter of 2018 as compared to 5.9 percent for the same period in 2017. Selling, general and administrative expenses decreased $1.4 million to $73.7 million for the third quarter of 2018 as compared to $75.1 million for the same period in 2017.
Income before Interest and Income Taxes. Income before interest and income taxes for the third quarter of 2018 was $138.5 million as compared to $138.6 million in the third quarter of 2017, and margin decreased to 10.6 percent from 10.9 percent over the same periods. Higher segment income in the closures and plastic container businesses was offset by lower segment income in the metal container business. Margin decreased largely due to the mathematical impact on margin of higher sales as a result of the contractual pass through of significantly higher raw material costs.
Segment income of the metal container business for the third quarter of 2018 decreased $5.3 million, or 5.7 percent, as compared to the same period in 2017, and segment income margin decreased to 10.9 percent from 11.9 percent over the same periods. The decrease in segment income was primarily attributable to lower unit volumes and higher freight expense, partially offset by the contractual pass through to customers of indexed inflation as compared to the unfavorable impact in the prior year period from the contractual pass through of indexed deflation, a more favorable mix of products sold and foreign currency transaction losses in the prior year period. The decline in segment income margin was primarily due to the mathematical impact on margin of higher sales as a result of the contractual pass through of significantly higher raw material costs.
-22-
Segment income of the closures business for the third quarter of 2018 increased $2.0 million, or 4.4 percent, as compared to the same period in 2017, and segment income margin increased to 13.1 percent from 12.7 percent over the same periods. The increase in segment income was principally a result of lower costs primarily due to synergies realized from the SDS acquisition and a more favorable mix of products sold, partially offset by the unfavorable impact from the lagged pass through to customers of higher resin costs.
Segment income of the plastic container business for the third quarter of 2018 increased $2.0 million, or 30.8 percent, as compared to the same period in 2017, and segment income margin increased to 5.7 percent from 4.7 percent over the same periods. The increase in segment income was primarily attributable to higher volumes and lower manufacturing costs, partially offset by the unfavorable impact from the lagged pass through to customers of higher resin costs and costs associated with the start-up of the new manufacturing facility in Fort Smith, Arkansas.
Interest and Other Debt Expense. Interest and other debt expense for the third quarter of 2018 decreased $2.4 million to $28.2 million as compared to $30.6 million in the same period in 2017 primarily due to lower weighted average outstanding borrowings largely as a result of the partial repayment of acquisition borrowings under the Credit Agreement at the end of 2017.
Provision for Income Taxes. The effective tax rates were 23.1 percent and 33.0 percent for the third quarters of 2018 and 2017, respectively. The effective tax rate in the third quarter of 2018 benefitted primarily from the 2017 Tax Act and the settlement of a state tax audit in the current year period.
Nine Months Ended September 30, 2018 Compared with Nine Months Ended September 30, 2017
Overview. Consolidated net sales were $3.38 billion in the first nine months of 2018, representing a 9.2 percent increase as compared to the first nine months of 2017 primarily as a result of the pass through of higher raw material costs across all businesses, the acquisition of SDS in April 2017, 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. Income before interest and income taxes for the first nine months of 2018 increased by $64.2 million, or 23.7 percent, as compared to the same period in 2017 primarily as a result of the inclusion in the prior year period of acquisition related costs of $23.8 million, the benefit from the inclusion of a full year of operations of SDS, the unfavorable impact in the prior year period from the write-up of inventory of SDS for purchase accounting, lower manufacturing costs in each of our businesses, higher volumes in the plastic container business, the contractual pass through to customers in the metal container business of indexed inflation in the current year period as compared to the unfavorable impact in the prior year period from the contractual pass through of indexed deflation, a charge of $3.0 million in the prior year period related to the resolution of a past non-commercial legal dispute, lower rationalization charges and foreign currency transaction losses in the prior year period. These increases were partially offset by the impact from lower unit volumes in the metal container business and legacy closures operations, higher freight expense, the unfavorable impact from the lagged pass through of higher resin costs in the closures and plastic container businesses and costs associated with the start-up of two new manufacturing facilities. Results for the first nine months of 2018 and 2017 included rationalization charges of $1.5 million and $4.5 million, respectively, and loss on early extinguishment of debt of $2.5 million and $7.1 million, respectively. Results for the first nine months of 2018 and 2017 also included other pension and postretirement income of $27.5 million and $25.2 million, respectively. Net income for the first nine months of 2018 was $185.8 million as compared to $123.5 million for the same period in 2017. Net income per diluted share for the first nine months of 2018 was $1.66 as compared to $1.11 for the same period in 2017.
Net Sales. The $284.3 million increase in consolidated net sales in the first nine months of 2018 as compared to the first nine months of 2017 was the result of higher net sales in each of our businesses.
Net sales for the metal container business increased $40.3 million, or 2.3 percent, in the first nine months of 2018 as compared to the same period in 2017. This increase was primarily the result of the pass through of higher raw material and other manufacturing costs and the impact of favorable foreign currency translation of approximately $14.0 million, partially offset by lower unit volumes of approximately six percent. The decrease in unit volumes was primarily the result of a seasonal customer adjusting its inventory levels, a customer plant shutdown in the fruit market, the competitive loss of a smaller, lower margin customer, lower unit volumes with certain customers who bought ahead in the fourth quarter of 2017 as well as a decline in soup volume.
Net sales for the closures business increased $205.8 million, or 22.8 percent, in the first nine months of 2018 as compared to the same period in 2017. This increase was primarily the result of the acquisition of SDS, the impact of favorable foreign currency translation of approximately $22.0 million and the pass through of higher raw material costs, partially offset by lower unit volumes of approximately three percent in the legacy closures operations due primarily to a less favorable fruit and vegetable pack in Europe as a result of weather conditions.
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Net sales for the plastic container business increased $38.2 million, or 9.1 percent, in the first nine months of 2018 as compared to the same period in 2017. This increase was primarily due to the pass through of higher raw material costs, higher volumes of approximately four percent and the impact of favorable foreign currency translation of approximately $1.0 million.
Gross Profit. Gross profit margin increased 0.3 percentage points to 15.9 percent in the first nine months of 2018 as compared to the same period in 2017 for the reasons discussed below in "Income before Interest and Income Taxes".
Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of consolidated net sales decreased 0.7 percentage points to 6.8 percent for the first nine months of 2018 as compared to 7.5 percent for the same period in 2017. Selling, general and administrative expenses decreased $3.8 million to $228.7 million for the first nine months of 2018 as compared to $232.5 million for the same period in 2017. These decreases were primarily due to the inclusion in the prior year period of $23.8 million of costs attributed to the acquisition of SDS and a $3.0 million charge related to the resolution of a past non-commercial legal dispute, partially offset by the inclusion of SDS for the full period in 2018.
Income before Interest and Income Taxes. Income before interest and income taxes for the first nine months of 2018 increased by $64.2 million, or 23.7 percent, as compared to the first nine months of 2017, and margin increased to 9.9 percent from 8.7 percent over the same periods. The increase in income before interest and income taxes was primarily the result of higher segment income in the closures and plastic container businesses as well as the inclusion in the prior year period of acquisition related costs of $23.8 million, partially offset by a decrease in segment income in the metal container business. The increase in margin was primarily attributable to the inclusion in the prior year period of acquisition related costs and an increase in segment income margin in the closures and plastic container businesses, partially offset by a decline in segment income margin in the metal container business.
Segment income of the metal container business for the first nine months of 2018 decreased $13.2 million, or 7.1 percent, as compared to the same period in 2017, and segment income margin decreased to 9.5 percent from 10.5 percent over the same periods. The decrease in segment income was primarily attributable to lower unit volumes and higher freight expense, partially offset by the contractual pass through to customers of indexed inflation in the current year period as compared to the unfavorable impact in the prior year period from the contractual pass through of indexed deflation, a $3.0 million charge in the prior year period related to the resolution of a past non-commercial legal dispute, lower manufacturing costs and lower rationalization charges. The decline in segment income margin was due primarily to the mathematical impact on margin of higher sales as a result of the contractual pass through of significantly higher raw material costs. Rationalization charges were $0.8 million and $3.3 million in the first nine months of 2018 and 2017, respectively.
Segment income of the closures business for the first nine months of 2018 increased $40.3 million, or 39.1 percent, as compared to the same period in 2017, and segment income margin increased to 12.9 percent from 11.4 percent over the same periods. The increase in segment income was primarily due to the inclusion of segment income from the SDS operations for the full period in 2018, the unfavorable impact in the prior year period of a charge of $11.9 million for the write-up of inventory of SDS for purchase accounting, lower manufacturing costs and foreign currency transaction losses in the prior year period, partially offset by lower unit volumes in the legacy closures operations and the unfavorable impact from the lagged pass through of lower resin costs.
Segment income of the plastic container business for the first nine months of 2018 increased $12.7 million, or 63.5 percent, as compared to the same period in 2017, and segment income margin increased to 7.1 percent from 4.7 percent over the same periods. The increase in segment income was primarily attributable to higher volumes and lower manufacturing costs, partially offset by the unfavorable impact from the lagged pass through of lower resin costs and costs associated with the start-up of the new manufacturing facility in Fort Smith, Arkansas.
Interest and Other Debt Expense. Interest and other debt expense before loss on early extinguishment of debt for the first nine months of 2018 increased $8.4 million to $88.6 million as compared to $80.2 million in the same period in 2017 primarily due to higher average outstanding borrowings principally as a result of borrowings for the acquisition of SDS and higher weighted average interest rates. Loss on early extinguishment of debt of $2.5 million in the first nine months of 2018 was a result of the redemption of all remaining outstanding 5% Notes in April 2018 and the completion of the First Amendment to the Credit Agreement in May 2018. Loss on early extinguishment of debt of $7.1 million in the first nine months of 2017 was a result of the prepayment of outstanding U.S. term loans and Euro term loans under our previous senior secured credit facility and the partial redemption of the 5% Notes in April 2017.
Provision for Income Taxes. The effective tax rates were 23.8 percent and 32.6 percent for the first nine months of 2018 and 2017, respectively. The effective tax rate in the first nine months of 2018 benefited from the 2017 Tax Act.
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CAPITAL RESOURCES AND LIQUIDITY
Our principal sources of liquidity have been net cash from operating activities and borrowings under our debt instruments, including our senior secured credit facility. Our liquidity requirements arise from our obligations under the indebtedness incurred in connection with our acquisitions and the refinancing of that indebtedness, capital investment in new and existing equipment, the funding of our seasonal working capital needs and other general corporate uses.
On April 16, 2018, we redeemed all remaining outstanding 5% Notes ($280.0 million aggregate principal amount) at a redemption price of 100 percent of their principal amount plus accrued and unpaid interest up to the redemption date. We funded this redemption with revolving loan borrowings under the Credit Agreement and cash on hand.
On May 30, 2018, we completed the First Amendment to the Credit Agreement, which extends the maturity dates by approximately fourteen months for term loans and the revolving loan facility under the Credit Agreement, lowers the margin on borrowings under the Credit Agreement and provides us with additional flexibility with regard to strategic initiatives.
As a result of the redemption of the remaining outstanding 5% Notes and the First Amendment, we recorded a pre-tax charge for the loss on early extinguishment of debt of $2.5 million during the second quarter of 2018.
You should also read Note 7 to our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2018 included elsewhere in this Quarterly Report.
For the nine months ended September 30, 2018, we used net borrowings of revolving loans of $657.2 million and cash provided by operations of $13.1 million to fund repayments of long-term debt of $286.2 million, decreases in outstanding checks of $87.8 million, net capital expenditures of $134.4 million, dividends paid on our common stock of $33.8 million, repurchases of our common stock of $3.1 million and debt issuance costs of $2.9 million and to increase cash and cash equivalents (including the negative effect of exchange rate changes of $4.3 million) by $117.8 million.
For the nine months ended September 30, 2017, we used aggregate proceeds of $1,789.2 million from the issuance of the 4¾% Notes, the 3¼% Notes and term loan borrowings under our Credit Agreement and net borrowings of revolving loans of $427.2 million to fund the acquisition of SDS for $1,028.7 million, repayments of long-term debt of $755.0 million, cash used in operations of $4.5 million, net capital expenditures of $123.7 million, decreases in outstanding checks of $78.9 million, dividends paid on our common stock of $30.4 million, debt issuance costs of $16.6 million and repurchases of our common stock of $4.1 million and to increase cash and cash equivalents by $174.5 million.
At September 30, 2018, we had $698.0 million of revolving loans outstanding under the Credit Agreement, which includes revolving loan borrowings used to fund the redemption of the remaining outstanding 5% Notes. After taking into account outstanding letters of credit, the available portion of revolving loans under the Credit Agreement at September 30, 2018 was $472.5 million and Cdn $15.0 million.
Because we sell metal containers and closures used in fruit and vegetable pack processing, we have seasonal sales. As is common in the industry, we must utilize working capital to build inventory and then carry accounts receivable for some customers beyond the end of the packing season. Due to our seasonal requirements, which generally peak sometime in the summer or early fall, we may incur short-term indebtedness to finance our working capital requirements. Our peak seasonal working capital requirements have historically averaged approximately $350 million. We fund seasonal working capital requirements through revolving loans under the Credit Agreement, other foreign bank loans and cash on hand. We may use the available portion of revolving loans under the Credit Agreement, after taking into account our seasonal needs and outstanding letters of credit, for other general corporate purposes including acquisitions, capital expenditures, dividends, stock repurchases and to refinance or repurchase other debt.
We believe that cash generated from operations and funds from borrowings available under the Credit Agreement and other foreign bank loans will be sufficient to meet our expected operating needs, planned capital expenditures, debt service, tax obligations, pension benefit plan contributions, share repurchases and common stock dividends for the foreseeable future. We continue to evaluate acquisition opportunities in the consumer goods packaging market and may incur additional indebtedness, including indebtedness under the Credit Agreement, to finance any such acquisition.
We are in compliance with all financial and operating covenants contained in our financing agreements and believe that we will continue to be in compliance during 2018 with all of these covenants.
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Rationalization Charges
We continually evaluate cost reduction opportunities across each of our businesses, including rationalizations of our existing facilities through plant closings and downsizings. We use a disciplined approach to identify opportunities that generate attractive cash returns. Under our rationalization plans, we made cash payments of $1.8 million and $2.8 million for the nine months ended September 30, 2018 and 2017, respectively. Additional cash spending under our rationalization plans of $2.8 million is expected through 2023.
You should also read Note 4 to our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2018 included elsewhere in this Quarterly Report.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued an ASU that amends existing guidance for certain leases by lessees. This amendment will require an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. In addition, this amendment clarifies the presentation requirements of the effects of leases in the statement of income and statement of cash flows. We will adopt this amendment on January 1, 2019. In adopting this amendment, we expect to elect the transition method which will allow us to recognize the effects of applying this amendment as a cumulative effect to retained earnings as of January 1, 2019 and not restate comparative periods for the effects of this amendment. We are currently evaluating the impact of this amendment on our financial position, results of operations and cash flows.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to our operations result primarily from changes in interest rates and, with respect to our international metal container and closures operations and our Canadian plastic container operations, from foreign currency exchange rates. In the normal course of business, we also have risk related to commodity price changes for items such as natural gas. We employ established policies and procedures to manage our exposure to these risks. Interest rate, foreign currency and commodity pricing transactions are used only to the extent considered necessary to meet our objectives. We do not utilize derivative financial instruments for trading or other speculative purposes.
Information regarding our interest rate risk, foreign currency exchange rate risk and commodity pricing risk has been disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Since such filing, other than the changes discussed in Notes 7 and 8 to our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2018 included elsewhere in this Quarterly Report, there has not been a material change to our interest rate risk, foreign currency exchange rate risk or commodity pricing risk or to our policies and procedures to manage our exposure to these risks.
Item 4. CONTROLS AND PROCEDURES
As required by Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, as of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including the Principal Executive Officer and the Principal Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal controls over financial reporting during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, these internal controls.
On April 6, 2017, we acquired SDS. We are currently in the process of integrating the internal controls and procedures of SDS into our internal controls over financial reporting. As provided under the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations of the Securities and Exchange Commission, we will include the internal controls and procedures of SDS in our annual assessment of the effectiveness of our internal control over financial reporting for our 2018 fiscal year.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.
SILGAN HOLDINGS INC.
Dated: November 8, 2018
/s/ Robert B. Lewis
Robert B. Lewis
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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falsedesktopSLGN2018-09-30000084986918000047{"post_metric": "https://q10k.com/post-metric", "tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "SILGAN HOLDINGS INC.\t\nTABLE OF CONTENTS\t\n\tPage No.\nPart I. Financial Information\t3\nItem 1. Financial Statements\t3\nCondensed Consolidated Balance Sheets at September 30, 2018 and 2017 and December 31, 2017\t3\nCondensed Consolidated Statements of Income for the three and nine months ended September 30, 2018 and 2017\t4\nCondensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017\t5\nCondensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017\t6\nCondensed Consolidated Statements of Stockholders' Equity for the nine months ended September 30, 2018 and 2017\t7\nNotes to Condensed Consolidated Financial Statements\t8\nItem 2. Management's Discussion and Analysis of Financial Condition and Results of Operations\t20\nItem 3. Quantitative and Qualitative Disclosures About Market Risk\t26\nItem 4. Controls and Procedures\t26\nPart II. Other Information\t27\nItem 6. Exhibits\t27\nSignatures\t28\n", "q10k_tbl_1": "\tSept. 30, 2018\tSept. 30, 2017\tDec. 31, 2017\n\t(unaudited)\t(unaudited)\t\nAssets\t\t\t\nCurrent assets:\t\t\t\nCash and cash equivalents\t$171,369\t$199,186\t$53,533\nTrade accounts receivable, net\t783,306\t702,307\t454,637\nInventories\t690,378\t704,384\t721,290\nPrepaid expenses and other current assets\t67,492\t62,463\t62,462\nTotal current assets\t1,712,545\t1,668,340\t1,291,922\nProperty, plant and equipment, net\t1,502,231\t1,472,321\t1,489,872\nGoodwill\t1,156,051\t1,160,453\t1,171,454\nOther intangible assets, net\t392,144\t422,050\t417,088\nOther assets, net\t295,228\t297,926\t275,113\n\t$5,058,199\t$5,021,090\t$4,645,449\nLiabilities and Stockholders' Equity\t\t\t\nCurrent liabilities:\t\t\t\nRevolving loans and current portion of long-term debt\t$733,404\t$640,390\t$108,789\nTrade accounts payable\t552,897\t487,775\t659,629\nAccrued payroll and related costs\t71,658\t69,044\t66,257\nAccrued liabilities\t101,895\t122,129\t123,602\nTotal current liabilities\t1,459,854\t1,319,338\t958,277\nLong-term debt\t2,186,275\t2,465,780\t2,438,502\nDeferred income taxes\t279,449\t395,181\t262,394\nOther liabilities\t220,704\t217,688\t220,211\nStockholders' equity:\t\t\t\nCommon stock\t1,751\t1,751\t1,751\nPaid-in capital\t272,301\t258,653\t262,201\nRetained earnings\t1,970,875\t1,651,760\t1,809,845\nAccumulated other comprehensive loss\t(212,256)\t(170,263)\t(188,973)\nTreasury stock\t(1,120,754)\t(1,118,798)\t(1,118,759)\nTotal stockholders' equity\t911,917\t623,103\t766,065\n\t$5,058,199\t$5,021,090\t$4,645,449\n", "q10k_tbl_2": "\tThree Months Ended\t\tNine Months Ended\t\n\tSept. 30, 2018\tSept. 30, 2017\tSept. 30, 2018\tSept. 30, 2017\nNet sales\t$1,306,999\t$1,266,930\t$3,378,383\t$3,094,150\nCost of goods sold\t1,102,892\t1,061,289\t2,840,991\t2,611,836\nGross profit\t204,107\t205,641\t537,392\t482,314\nSelling, general and administrative expenses\t73,690\t75,149\t228,691\t232,461\nRationalization charges\t288\t561\t1,483\t4,485\nOther pension and postretirement income\t(8,326)\t(8,635)\t(27,536)\t(25,192)\nIncome before interest and income taxes\t138,455\t138,566\t334,754\t270,560\nInterest and other debt expense before loss on early extinguishment of debt\t28,199\t30,583\t88,602\t80,207\nLoss on early extinguishment of debt\t-\t-\t2,493\t7,052\nInterest and other debt expense\t28,199\t30,583\t91,095\t87,259\nIncome before income taxes\t110,256\t107,983\t243,659\t183,301\nProvision for income taxes\t25,517\t35,601\t57,857\t59,762\nNet income\t$84,739\t$72,382\t$185,802\t$123,539\nEarnings per share:\t\t\t\t\nBasic net income per share\t$0.77\t$0.66\t$1.68\t$1.12\nDiluted net income per share\t$0.76\t$0.65\t$1.66\t$1.11\nDividends per share (a)\t$0.10\t$0.09\t$0.30\t$0.27\nWeighted average number of shares:\t\t\t\t\nBasic\t110,657\t110,391\t110,599\t110,327\nEffect of dilutive securities\t1,036\t1,036\t1,010\t996\nDiluted\t111,693\t111,427\t111,609\t111,323\n", "q10k_tbl_3": "\tThree Months Ended\t\tNine Months Ended\t\n\tSept. 30, 2018\tSept. 30, 2017\tSept. 30, 2018\tSept. 30, 2017\nNet income\t$84,739\t$72,382\t$185,802\t$123,539\nOther comprehensive (loss) income, net of tax:\t\t\t\t\nChanges in net prior service credit and actuarial losses\t807\t558\t2,441\t1,816\nChange in fair value of derivatives\t476\t(51)\t673\t(526)\nForeign currency translation\t(4,576)\t14,369\t(26,397)\t52,303\nOther comprehensive (loss) income\t(3,293)\t14,876\t(23,283)\t53,593\nComprehensive income\t$81,446\t$87,258\t$162,519\t$177,132\n", "q10k_tbl_4": "\t2018\t2017\nCash flows provided by (used in) operating activities:\t\t\nNet income\t$185,802\t$123,539\nAdjustments to reconcile net income to net cash provided by (used in) operating activities:\t\t\nDepreciation and amortization\t146,246\t129,734\nRationalization charges\t1,483\t4,485\nStock compensation expense\t11,162\t11,052\nLoss on early extinguishment of debt\t2,493\t7,052\nOther changes that provided (used) cash, net of effects from acquisition:\t\t\nTrade accounts receivable, net\t(271,636)\t(285,901)\nInventories\t(32,743)\t(2,895)\nTrade accounts payable\t(11,185)\t1,725\nAccrued liabilities\t(11,227)\t16,003\nOther, net\t(7,304)\t(9,247)\nNet cash provided by (used in) operating activities\t13,091\t(4,453)\nCash flows provided by (used in) investing activities:\t\t\nPurchase of business, net of cash acquired\t-\t(1,028,729)\nCapital expenditures\t(134,636)\t(124,163)\nOther, net\t236\t539\nNet cash used in investing activities\t(134,400)\t(1,152,353)\nCash flows provided by (used in) financing activities:\t\t\nBorrowings under revolving loans\t923,639\t1,108,208\nRepayments under revolving loans\t(266,477)\t(680,986)\nProceeds from issuance of long-term debt\t-\t1,789,200\nRepayments of long-term debt\t(286,200)\t(755,037)\nChanges in outstanding checks - principally vendors\t(87,795)\t(78,944)\nDividends paid on common stock\t(33,843)\t(30,373)\nDebt issuance costs\t(2,866)\t(16,643)\nRepurchase of common stock under stock plan\t(3,057)\t(4,123)\nNet cash provided by financing activities\t243,401\t1,331,302\nEffect of exchange rate changes on cash and cash equivalents\t(4,256)\t-\nCash and cash equivalents:\t\t\nNet increase\t117,836\t174,496\nBalance at beginning of year\t53,533\t24,690\nBalance at end of period\t$171,369\t$199,186\nInterest paid, net\t$104,040\t$78,528\nIncome taxes paid, net\t39,400\t50,226\n", "q10k_tbl_5": "\t\t\t\t\tAccumulated Other Comprehensive Loss \t \t\n\tCommon Stock\t\t\t\t \t Total Stockholders' Equity\n\tShares Outstanding\tPar Value\tPaid-in Capital\tRetained Earnings\t Treasury Stock\t\nBalance at December 31, 2016\t55,051\t$876\t$249,763\t$1,558,594\t$(223,856) \t$(1,115,962) \t$469,415\nNet income\t-\t-\t-\t123,539\t- \t- \t123,539\nOther comprehensive income\t-\t-\t-\t-\t53,593 \t- \t53,593\nDividends declared on common stock\t-\t-\t-\t(30,373)\t- \t- \t(30,373)\nStock compensation expense\t-\t-\t11,052\t-\t- \t- \t11,052\nNet issuance of treasury stock for vested restricted stock units\t180\t-\t(1,287)\t-\t- \t(2,836) \t(4,123)\nTwo-for-one stock split\t55,142\t875\t(875)\t-\t- \t- \t-\nBalance at September 30, 2017\t110,373\t$1,751\t$258,653\t$1,651,760\t$(170,263) \t$(1,118,798) \t$623,103\nBalance at December 31, 2017\t110,385\t$1,751\t$262,201\t$1,809,845\t$(188,973) \t$(1,118,759) \t$766,065\nAdoption of accounting standards update for revenue recognition\t-\t-\t-\t9,061\t- \t- \t9,061\nNet income\t-\t-\t-\t185,802\t- \t- \t185,802\nOther comprehensive loss\t-\t-\t-\t-\t(23,283) \t- \t(23,283)\nDividends declared on common stock\t-\t-\t-\t(33,833)\t- \t- \t(33,833)\nStock compensation expense\t-\t-\t11,162\t-\t- \t- \t11,162\nNet issuance of treasury stock for vested restricted stock units\t233\t-\t(1,062)\t-\t- \t(1,995) \t(3,057)\nBalance at September 30, 2018\t110,618\t$1,751\t$272,301\t$1,970,875\t$(212,256) \t$(1,120,754) \t$911,917\n", "q10k_tbl_6": "\tThree Months Ended\t\tNine Months Ended\t\n\tSept. 30, 2018\tSept. 30, 2017\tSept. 30, 2018\tSept. 30, 2017\n\t(Dollars in thousands)\t\t\t\nMetal containers\t$797,768\t$772,382\t$1,808,585\t$1,768,333\nClosures\t360,816\t357,343\t1,109,924\t904,112\nPlastics\t148,415\t137,205\t459,874\t421,705\n\t$1,306,999\t$1,266,930\t$3,378,383\t$3,094,150\n", "q10k_tbl_7": "\tThree Months Ended\t\tNine Months Ended\t\n\tSept. 30, 2018\tSept. 30, 2017\tSept. 30, 2018\tSept. 30, 2017\n\t(Dollars in thousands)\t\t\t\nNorth America\t$1,056,099\t$1,011,573\t$2,651,225\t$2,488,620\nEurope and other\t250,900\t255,357\t727,158\t605,530\n\t$1,306,999\t$1,266,930\t$3,378,383\t$3,094,150\n", "q10k_tbl_8": "\tUnrecognized Net Defined Benefit Plan Costs\tChange in Fair Value of Derivatives\tForeign Currency Translation\tTotal\n\t(Dollars in thousands)\t\t\t\nBalance at December 31, 2017\t$(104,822)\t$(89)\t$(84,062)\t$(188,973)\nOther comprehensive loss before reclassifications\t(917)\t663\t(26,397)\t(26,651)\nAmounts reclassified from accumulated other comprehensive loss\t3,358\t10\t-\t3,368\nOther comprehensive loss\t2,441\t673\t(26,397)\t(23,283)\nBalance at September 30, 2018\t$(102,381)\t$584\t$(110,459)\t$(212,256)\n", "q10k_tbl_9": "\tSept. 30, 2018\tSept. 30, 2017\tDec. 31, 2017\n\t(Dollars in thousands)\t\t\nRaw materials\t$250,051\t$211,959\t$233,410\nWork-in-process\t125,336\t132,071\t124,396\nFinished goods\t384,815\t415,645\t433,937\nOther\t12,999\t13,128\t12,370\n\t773,201\t772,803\t804,113\nAdjustment to value inventory at cost on the LIFO method\t(82,823)\t(68,419)\t(82,823)\n\t$690,378\t$704,384\t$721,290\n", "q10k_tbl_10": "\tSept. 30, 2018\tSept. 30, 2017\tDec. 31, 2017\n\t(Dollars in thousands)\t\t\nBank debt\t\t\t\nBank revolving loans\t$698,000\t$598,751\t$-\nU.S. term loans\t800,000\t800,000\t800,000\nCanadian term loans\t23,335\t27,365\t27,147\nOther foreign bank revolving and term loans\t36,143\t49,596\t76,798\nTotal bank debt\t1,557,478\t1,475,712\t903,945\n5% Senior Notes\t-\t280,000\t280,000\n5½% Senior Notes\t300,000\t300,000\t300,000\n4¾% Senior Notes\t300,000\t300,000\t300,000\n3¼% Senior Notes\t754,260\t767,910\t780,325\nOther obligations\t21,950\t-\t-\nTotal debt - principal\t2,933,688\t3,123,622\t2,564,270\nLess unamortized debt issuance costs\t14,009\t17,452\t16,979\nTotal debt\t2,919,679\t3,106,170\t2,547,291\nLess current portion\t733,404\t640,390\t108,789\n\t$2,186,275\t$2,465,780\t$2,438,502\n", "q10k_tbl_11": "Date\tPercentage\nDecember 31, 2019\t5.0%\nDecember 31, 2020\t10.0%\nDecember 31, 2021\t10.0%\nDecember 31, 2022\t10.0%\nDecember 31, 2023\t10.0%\n", "q10k_tbl_12": "\tCarrying Amount\tFair Value\n\t(Dollars in thousands)\t\nAssets:\t\t\nCash and cash equivalents\t$171,369\t$171,369\nLiabilities:\t\t\nBank debt\t$1,557,478\t$1,557,478\n5½% Senior Notes\t300,000\t304,089\n4¾% Senior Notes\t300,000\t287,982\n3¼% Senior Notes\t754,260\t779,769\n", "q10k_tbl_13": "\tThree Months Ended\t\tNine Months Ended\t\n\tSept. 30, 2018\tSept. 30, 2017\tSept. 30, 2018\tSept. 30, 2017\n\t(Dollars in thousands)\t\t\t\nService cost\t$3,411\t$3,532\t$10,842\t$9,967\nInterest cost\t6,348\t6,482\t18,953\t19,114\nExpected return on plan assets\t(17,137)\t(15,832)\t(51,382)\t(47,258)\nAmortization of prior service cost\t34\t75\t103\t235\nAmortization of actuarial losses\t1,877\t1,501\t5,450\t5,208\nNet periodic benefit credit\t$(5,467)\t$(4,242)\t$(16,034)\t$(12,734)\n", "q10k_tbl_14": "\tThree Months Ended\t\tNine Months Ended\t\n\tSept. 30, 2018\tSept. 30, 2017\tSept. 30, 2018\tSept. 30, 2017\n\t(Dollars in thousands)\t\t\t\nService cost\t$15\t$9\t$78\t$79\nInterest cost\t158\t168\t483\t520\nAmortization of prior service cost (credit)\t561\t(857)\t(738)\t(2,564)\nAmortization of actuarial gains\t(167)\t(172)\t(405)\t(447)\nNet periodic benefit cost (credit)\t$567\t$(852)\t$(582)\t$(2,412)\n", "q10k_tbl_15": "\tMetal Containers\tClosures\tPlastic Containers\tCorporate\tTotal\n\t(Dollars in thousands)\t\t\t\t\nThree Months Ended September 30, 2018\t\t\t\t\t\nNet sales\t$797,768\t$360,816\t$148,415\t$-\t$1,306,999\nDepreciation and amortization(1)\t19,823\t18,378\t9,171\t43\t47,415\nRationalization charges\t72\t111\t105\t-\t288\nSegment income\t86,928\t47,349\t8,446\t(4,268)\t138,455\nThree Months Ended September 30, 2017\t\t\t\t\t\nNet sales\t$772,382\t$357,343\t$137,205\t$-\t$1,266,930\nDepreciation and amortization(1)\t19,250\t17,457\t8,636\t22\t45,365\nRationalization charges\t326\t134\t101\t-\t561\nSegment income(2)\t92,222\t45,322\t6,444\t(5,422)\t138,566\nNine Months Ended September 30, 2018\t\t\t\t\t\nNet sales\t$1,808,585\t$1,109,924\t$459,874\t$-\t$3,378,383\nDepreciation and amortization(1)\t60,500\t55,786\t26,975\t107\t143,368\nRationalization charges\t812\t150\t521\t-\t1,483\nSegment income\t172,268\t143,277\t32,687\t(13,478)\t334,754\nNine Months Ended September 30, 2017\t\t\t\t\t\nNet sales\t$1,768,333\t$904,112\t$421,705\t$-\t$3,094,150\nDepreciation and amortization(1)\t57,172\t43,638\t25,644\t68\t126,522\nRationalization charges\t3,288\t535\t662\t-\t4,485\nSegment income(2)\t185,525\t102,947\t19,944\t(37,856)\t270,560\n", "q10k_tbl_16": "\tThree Months Ended\t\tNine Months Ended\t\n\tSept. 30, 2018\tSept. 30, 2017\tSept. 30, 2018\tSept. 30, 2017\n\t(Dollars in thousands)\t\t\t\nTotal segment income\t$138,455\t$138,566\t$334,754\t$270,560\nInterest and other debt expense\t28,199\t30,583\t91,095\t87,259\nIncome before income taxes\t$110,256\t$107,983\t$243,659\t$183,301\n", "q10k_tbl_17": "\tThree Months Ended\t\tNine Months Ended\t\n\tSept. 30, 2018\tSept. 30, 2017\tSept. 30, 2018\tSept. 30, 2017\nNet sales\t\t\t\t\nMetal containers\t61.0%\t61.0%\t53.5%\t57.2%\nClosures\t27.6\t28.2\t32.9\t29.2\nPlastic containers\t11.4\t10.8\t13.6\t13.6\nConsolidated\t100.0\t100.0\t100.0\t100.0\nCost of goods sold\t84.4\t83.8\t84.1\t84.4\nGross profit\t15.6\t16.2\t15.9\t15.6\nSelling, general and administrative expenses\t5.6\t5.9\t6.8\t7.5\nRationalization charges\t-\t0.1\t-\t0.2\nOther pension and postretirement income\t(0.6)\t(0.7)\t(0.8)\t(0.8)\nIncome before interest and income taxes\t10.6\t10.9\t9.9\t8.7\nInterest and other debt expense\t2.2\t2.4\t2.7\t2.8\nIncome before income taxes\t8.4\t8.5\t7.2\t5.9\nProvision for income taxes\t1.9\t2.8\t1.7\t1.9\nNet income\t6.5%\t5.7%\t5.5%\t4.0%\n", "q10k_tbl_18": "\tThree Months Ended\t\tNine Months Ended\t\n\tSept. 30, 2018\tSept. 30, 2017\tSept. 30, 2018\tSept. 30, 2017\n\t(Dollars in millions)\t\t\t\nNet sales\t\t\t\t\nMetal containers\t$797.8\t$772.4\t$1,808.6\t$1,768.3\nClosures\t360.8\t357.3\t1,109.9\t904.1\nPlastic containers\t148.4\t137.2\t459.9\t421.7\nConsolidated\t$1,307.0\t$1,266.9\t$3,378.4\t$3,094.1\nSegment income\t\t\t\t\nMetal containers (1)\t$86.9\t$92.2\t$172.3\t$185.5\nClosures (2)\t47.3\t45.3\t143.3\t103.0\nPlastic containers (3)\t8.5\t6.5\t32.7\t20.0\nCorporate (4)\t(4.2)\t(5.4)\t(13.5)\t(37.9)\nConsolidated\t$138.5\t$138.6\t$334.8\t$270.6\n", "q10k_tbl_19": "Exhibit Number\tDescription\n31.1\tCertification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.\n31.2\tCertification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.\n32.1\tCertification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.\n32.2\tCertification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.\n101.INS\tXBRL Instance Document.\n101.SCH\tXBRL Taxonomy Extension Schema Document.\n101.CAL\tXBRL Taxonomy Extension Calculation Linkbase Document.\n101.DEF\tXBRL Taxonomy Extension Definition Linkbase Document.\n101.LAB\tXBRL Taxonomy Extension Label Linkbase Document.\n101.PRE\tXBRL Taxonomy Extension Presentation Linkbase Document.\n"}{"bs": "q10k_tbl_1", "is": "q10k_tbl_2", "cf": "q10k_tbl_4"}