Silgan (SLGN) - 2023 Q3 - Quarterly Report

Part I Financial Statements The company's financial statements for Q3 2023 show decreased net sales and income, negative operating cash flow, and increased total assets and liabilities Financial Metric | Financial Metric | Sept. 30, 2023 | Sept. 30, 2022 | Dec. 31, 2022 | | :--- | :--- | :--- | :--- | | Total Current Assets | $2,661,822 | $2,332,228 | $2,132,652 | | Total Assets | $7,812,307 | $7,519,413 | $7,345,757 | | Total Current Liabilities | $1,915,561 | $1,681,412 | $1,437,860 | | Long-Term Debt | $3,312,685 | $3,246,738 | $3,345,381 | | Total Stockholders' Equity | $1,781,889 | $1,693,231 | $1,718,256 | Income Statement (in thousands) | Income Statement (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,803,101 | $1,970,445 | $4,648,109 | $4,956,112 | | Gross profit | $285,918 | $307,765 | $774,009 | $815,144 | | Net income | $110,617 | $138,703 | $261,536 | $316,253 | | Diluted net income per share | $1.02 | $1.25 | $2.38 | $2.85 | Cash Flow (in thousands) | Cash Flow (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash (used in) operating activities | ($596,042) | ($117,522) | | Net cash (used in) investing activities | ($170,558) | ($161,611) | | Net cash provided by (used in) financing activities | $487,600 | ($90,561) | | Net decrease in cash | ($278,498) | ($387,830) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes declining sales and income to lower volumes and destocking, while maintaining liquidity through operations and credit facilities Results of Operations Consolidated net sales and income declined due to lower volumes and non-recurring sales, while interest expenses significantly increased - Consolidated net sales decreased by $167.3 million (8.5%) in Q3 2023 and $308.0 million (6.2%) in the first nine months of 2023, primarily due to lower volumes across all segments, non-recurring sales from Russia in 2022, and the pass-through of lower resin costs[60][61] - Income before interest and income taxes fell by $25.3 million in Q3 2023 and $51.5 million in the first nine months of 2023, mainly due to lower volumes, higher pension expenses, and increased rationalization charges, partially offset by lower SG&A costs[65][66] - Interest and other debt expense increased by $13.6 million in Q3 2023 and $37.6 million in the first nine months of 2023, primarily due to higher weighted average interest rates[67][68] Dispensing and Specialty Closures Segment Dispensing and Specialty Closures segment net sales decreased due to lower volumes, but Q3 adjusted EBIT and margins improved Dispensing and Specialty Closures | Dispensing and Specialty Closures | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $559.1M | $575.5M | $1,699.1M | $1,775.9M | | Adjusted EBIT | $93.8M | $88.4M | $253.6M | $285.2M | | Adjusted EBIT margin | 16.8% | 15.4% | 14.9% | 16.1% | - Q3 net sales decreased by 2.8% due to a 3% decline in unit volumes, mainly from lower demand for closures in international food and beverage markets and non-recurring sales in Russia[78] - Q3 adjusted EBIT increased by $5.4 million, driven by higher selling prices to offset inflation, a more favorable product mix, and reduced SG&A expenses, which outweighed the impact of lower volumes[80] Metal Containers Segment Metal Containers segment net sales declined due to volume drops, yet Q3 adjusted EBIT margin improved, and nine-month EBIT increased Metal Containers | Metal Containers | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,094.6M | $1,212.0M | $2,475.6M | $2,617.1M | | Adjusted EBIT | $113.5M | $117.6M | $241.7M | $214.0M | | Adjusted EBIT margin | 10.4% | 9.7% | 9.8% | 8.2% | - Q3 net sales fell 9.7% due to an 11% decrease in unit volumes, largely attributed to customer destocking and non-recurring volumes from Russia in the prior year[85] - For the first nine months of 2023, adjusted EBIT increased by $27.7 million, primarily due to higher average selling prices from the contractual pass-through of inflation and lower SG&A costs, which offset the impact of lower volumes[88] Custom Containers Segment Custom Containers segment net sales and adjusted EBIT significantly decreased due to lower volumes, destocking, and unfavorable product mix Custom Containers | Custom Containers | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $149.4M | $182.9M | $473.4M | $563.1M | | Adjusted EBIT | $11.8M | $22.8M | $50.3M | $75.5M | | Adjusted EBIT margin | 7.9% | 12.5% | 10.6% | 13.4% | - Q3 net sales decreased 18.3% due to a combination of approximately 10% lower volumes from customer destocking, the pass-through of lower resin costs, and a less favorable product mix[92] - Q3 adjusted EBIT decreased by $11.0 million, and the margin fell to 7.9% from 12.5%, primarily due to the lower volumes and unfavorable product mix[94] Capital Resources and Liquidity The company relies on cash from operations and credit facilities for liquidity, funding operations, repurchases, and dividends through borrowings - For the nine months ended September 30, 2023, the company used net borrowings and cash on hand to fund a $596.0 million use of cash in operations, $183.9 million in common stock repurchases, and $59.7 million in dividends[98] - As of September 30, 2023, the company had $818.0 million of revolving loans outstanding and an available borrowing capacity of $660.5 million under its Credit Agreement[101] - The company maintains a Supply Chain Finance (SCF) program, with outstanding trade accounts payables subject to this program totaling approximately $294.1 million at September 30, 2023[105] Quantitative and Qualitative Disclosures About Market Risk The company's market risks primarily involve interest rates, foreign currency, and commodity prices, with no material changes since year-end 2022 - The company's primary market risks are related to interest rates, foreign currency exchange rates, and commodity prices[114] - There has been no material change to the company's market risk exposures or its management policies since the Annual Report on Form 10-K for the year ended December 31, 2022[115] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[116] - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[117] Part II Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 3.45 million shares for $152.9 million in Q3 2023, with $93.3 million remaining for future repurchases Unregistered Sales of Equity Securities and Use of Proceeds | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining Under Program | | :--- | :--- | :--- | :--- | | July 2023 | — | $— | $246.2M | | August 2023 | 2,829,774 | $44.63 | $119.9M | | September 2023 | 618,220 | $43.14 | $93.3M | | Q3 2023 Total | 3,447,994 | $44.36 | $93.3M | - The Board of Directors authorized a $300.0 million stock repurchase program on March 4, 2022, which is effective through December 31, 2026[118] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[119]