Silgan (SLGN) - 2022 Q1 - Quarterly Report

Part I. Financial Information Financial Statements This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2022, and 2021, including balance sheets, statements of income, comprehensive income, cash flows, and stockholders' equity, along with accompanying notes Condensed Consolidated Balance Sheets As of March 31, 2022, total assets increased to $7.71 billion from $6.44 billion year-over-year, primarily driven by growth in inventories, goodwill, and other intangible assets, with total liabilities also rising and stockholders' equity expanding to $1.64 billion from $1.28 billion in the prior year Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | March 31, 2021 | Dec. 31, 2021 | | :--- | :--- | :--- | :--- | | Total Current Assets | $2,281,771 | $1,819,238 | $2,295,849 | | Total Assets | $7,710,410 | $6,441,472 | $7,770,846 | | Total Current Liabilities | $1,716,956 | $1,155,108 | $1,508,522 | | Long-term Debt | $3,445,633 | $3,163,292 | $3,772,926 | | Total Stockholders' Equity | $1,638,239 | $1,276,356 | $1,562,696 | Condensed Consolidated Statements of Income For the first quarter of 2022, the company reported a 16.5% increase in net sales to $1.44 billion compared to $1.24 billion in the prior-year period, with net income growing to $84.9 million from $73.3 million, resulting in a diluted EPS of $0.76, up from $0.66 in Q1 2021 Q1 Statement of Income (in thousands, except per share amounts) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Sales | $1,441,886 | $1,238,110 | | Gross Profit | $233,453 | $221,466 | | Income before interest and income taxes | $143,392 | $126,549 | | Net Income | $84,875 | $73,281 | | Diluted Net Income per Share | $0.76 | $0.66 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for Q1 2022 was $100.1 million, a significant increase from $42.4 million in Q1 2021, primarily driven by a positive foreign currency translation adjustment of $12.4 million in 2022, compared to a negative adjustment of $33.4 million in the same period last year Comprehensive Income (in thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Income | $84,875 | $73,281 | | Other Comprehensive Income (Loss) | $15,186 | $(30,853) | | Comprehensive Income | $100,061 | $42,428 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $267.4 million in Q1 2022 from $172.1 million in Q1 2021, largely due to increased use of cash for inventories and trade accounts receivable, while financing activities resulted in a net cash outflow of $35.8 million, a shift from a net inflow of $25.7 million in the prior year Cash Flow Summary (in thousands) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(267,401) | $(172,148) | | Net cash used in investing activities | $(70,027) | $(68,362) | | Net cash (used in) provided by financing activities | $(35,843) | $25,693 | | Net decrease in cash | $(371,875) | $(219,350) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased to $1.64 billion as of March 31, 2022, from $1.28 billion a year prior, driven by net income of $84.9 million and other comprehensive income of $15.2 million, with the company also increasing its quarterly dividend per share to $0.16 from $0.14 in the prior year - Dividends declared on common stock per share increased to $0.16 in Q1 2022 from $0.14 in Q1 2021[19] Changes in Stockholders' Equity (in thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Beginning Balance | $1,562,696 | $1,264,676 | | Net Income | $84,875 | $73,281 | | Other Comprehensive Income (Loss) | $15,186 | $(30,853) | | Dividends Declared | $(17,923) | $(15,680) | | Ending Balance | $1,638,239 | $1,276,356 | Notes to Condensed Consolidated Financial Statements The notes provide detailed disclosures on significant accounting policies, revenue disaggregation, rationalization charges, debt, financial instruments, and segment performance, highlighting revenue growth across all segments, a significant decrease in rationalization charges, and the redemption of $300 million in 4¾% Senior Notes Revenues by Segment (in thousands) | Segment | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Dispensing and Specialty Closures | $597,927 | $509,352 | | Metal Containers | $650,726 | $554,081 | | Custom Containers | $193,233 | $174,677 | | Total | $1,441,886 | $1,238,110 | - On March 28, 2022, the company redeemed all $300.0 million of its outstanding 4¾% Senior Notes due 2025, resulting in a pre-tax charge of $1.5 million for the loss on early extinguishment of debt[30] Segment Income (in thousands) | Segment | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Dispensing and Specialty Closures | $87,313 | $65,645 | | Metal Containers | $38,009 | $45,614 | | Custom Containers | $24,694 | $24,486 | | Corporate | $(6,624) | $(9,196) | | Total Segment Income | $143,392 | $126,549 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 16.5% increase in consolidated net sales to $1.44 billion for Q1 2022, driven by higher selling prices and volume growth in the dispensing and specialty closures segment, with net income rising to $84.9 million from $73.3 million year-over-year, and sufficient liquidity for future needs after redeeming $300 million in senior notes General Silgan is a leading manufacturer of sustainable rigid packaging solutions for consumer goods across three main segments, aiming to increase shareholder value through business growth, cost reduction, and strategic acquisitions - The company is a leading manufacturer of sustainable rigid packaging solutions for consumer goods products across dispensing/specialty closures, metal containers, and custom plastic containers[53] - The company's objective is to increase shareholder value by growing the business, reducing operating costs, building sustainable competitive positions, and completing acquisitions with attractive cash returns[54] Results of Operations Q1 2022 net sales increased 16.5% YoY to $1.44 billion, and income before interest and taxes rose by $16.8 million, driven by passing through higher costs and an 8% volume increase in the dispensing segment, despite volume declines in metal and custom containers due to customer pre-buy activity and strong prior-year demand - Consolidated net sales increased 16.5% in Q1 2022 compared to Q1 2021, primarily due to passing through higher raw material and inflationary costs[58] - Dispensing and specialty closures segment sales increased 17.4%, driven by higher prices and an approximate 8% increase in unit volumes[61] - Metal containers segment sales increased 17.4% due to higher prices, but this was partially offset by a unit volume decrease of approximately 14%[62] - Custom containers segment sales increased 10.6% due to higher prices and a more favorable product mix, partially offset by an approximate 8% volume decrease[63] Capital Resources and Liquidity The company's primary liquidity sources are cash from operations and debt facilities, with Silgan redeeming all $300 million of its 4¾% Senior Notes in Q1 2022, and having $972.2 million available under its revolving credit facility as of March 31, 2022, which management believes is sufficient for foreseeable needs - On March 28, 2022, the company redeemed all $300.0 million of its outstanding 4¾% Notes, funded by revolving loan borrowings and cash on hand[72] - As of March 31, 2022, the company had $972.2 million available for borrowing under its revolving credit facility[76] - Management believes that cash from operations and available borrowings will be sufficient to meet expected operating needs, capital expenditures, debt service, and dividends for the foreseeable future[78] Guaranteed Securities This section provides summarized financial information for the Obligor Group, comprising Silgan Holdings Inc. and its U.S. subsidiaries that guarantee the company's senior notes and credit facility, including key balance sheet and income statement figures for this specific group of entities Obligor Group Summarized Financials (in millions) | Metric | March 31, 2022 | Dec. 31, 2021 | | :--- | :--- | :--- | | Current assets | $1,412.5 | $1,506.9 | | Noncurrent assets | $4,144.9 | $4,159.9 | | Current liabilities | $1,348.1 | $1,159.2 | | Noncurrent liabilities | $4,050.6 | $4,392.4 | Obligor Group Q1 2022 Results (in millions) | Metric | Q1 2022 | | :--- | :--- | | Net sales | $1,046.0 | | Gross profit | $143.7 | | Net income | $57.3 | Rationalization Charges The company continues to execute cost reduction plans, including facility rationalizations, with cash payments of $2.5 million in Q1 2022, and future cash expenditures expected to be approximately $3.1 million annually through 2040, primarily related to the withdrawal liability from the Central States Pension Plan - Cash payments for rationalization plans were $2.5 million for the three months ended March 31, 2022[85] - Remaining cash expenditures for the withdrawal liability related to the Central States Pension Plan are expected to be approximately $3.1 million annually through 2040[85] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks stem from changes in interest rates, foreign currency exchange rates, and commodity prices, which Silgan manages using established policies and derivative instruments for hedging purposes, with no material changes to these risks or management policies since the 2021 Annual Report on Form 10-K - The company's primary market risks are from changes in interest rates, foreign currency exchange rates, and commodity prices like natural gas[88] - There has not been a material change to the company's interest rate risk, foreign currency exchange rate risk, or commodity pricing risk since the fiscal year ended December 31, 2021[89] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal controls over financial reporting during the quarter, and the company is currently integrating the internal controls of three entities acquired in 2021 for inclusion in the 2022 annual assessment - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[90] - There were no changes in internal controls over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[91] - The company is in the process of integrating the internal controls of three entities acquired in 2021: Gateway Plastics LLC, Unicep Packaging LLC, and Easytech Closures S.p.A[92] Part II. Other Information Exhibits This section lists the exhibits filed with the Form 10-Q, including a form of Restricted Stock Unit Agreement, an amendment to the Senior Executive Performance Plan, and certifications by the CEO and CFO as required by Sections 302 and 906 of the Sarbanes-Oxley Act, along with XBRL data files - The report includes certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[93]