Silgan (US:SLGN)2021-02-25 20:59Sales Performance - The company achieved a 14% increase in unit volumes for metal food containers in 2020 compared to 2019, driven by higher demand for at-home food consumption [168]. - Net sales of the closures business reached $1.71 billion in 2020, reflecting a compounded annual growth rate of approximately 13.2% since 2003 [169]. - The plastic container business reported net sales of $651.5 million in 2020, with a compounded annual growth rate of approximately 6.2% since 1987 [170]. - In 2020, unit volumes for the closures business increased approximately 8%, primarily due to acquisitions and strong demand for consumer health and hygiene products [169]. - Consolidated net sales for 2020 were $4.92 billion, a 9.6% increase compared to 2019, driven by higher volumes across all business segments and acquisitions [186]. - Net sales for the metal container business increased by $84.8 million, or 3.4%, in 2020, primarily due to a 14% increase in unit volumes [188]. - Net sales for the closures business rose by $306.8 million, or 21.8%, in 2020, attributed to an 8% increase in unit volumes and the inclusion of acquired businesses [189][190]. - Net sales for the plastic container business increased by $40.4 million, or 6.6%, in 2020, mainly due to an 11% rise in volumes [191]. Financial Performance - Gross profit margin improved by 1.7 percentage points to 17.6% in 2020 compared to 15.9% in 2019 [192]. - Income before interest and income taxes increased by $152.9 million, or 42.5%, in 2020, with a margin increase to 10.4% from 8.0% [186][193]. - Net income for 2020 was $308.7 million, up from $193.8 million in 2019 [186]. - Selling, general and administrative expenses increased by $62.0 million in 2020, representing 7.7% of consolidated net sales [192]. - Segment income for the metal container business increased by $86.6 million, with a margin rise to 9.6% from 6.5% [194]. - Segment income for the closures business increased by $50.9 million, with a margin increase to 13.1% from 12.3% [195]. Debt and Financing - The aggregate interest and other debt expense as a percentage of income before interest and income taxes was 20.3% in 2020 [179]. - The company utilized $900 million of incremental term loans to fund the purchase price for the Albéa Dispensing Business in June 2020 [176]. - Total consolidated indebtedness was $3,272.0 million with cash and cash equivalents of $409.5 million as of December 31, 2020 [222]. - The company had $3,272.0 million of outstanding indebtedness as of December 31, 2020, with $925.8 million bearing interest at floating rates [240]. - The average outstanding variable rate debt in 2020 was 30% of the total debt, with 26% of the total debt being variable rate debt as of December 31, 2020 [253]. - A one percentage point change in interest rates for variable rate indebtedness would have impacted the 2020 interest expense by approximately $9.6 million [254]. Operational Changes - The company closed six metal container manufacturing facilities and three plastic container manufacturing facilities since 2015 to streamline operations and reduce costs [171]. - Approximately 90% of projected metal container sales in 2021 are expected to be under multi-year supply arrangements, which help mitigate cost volatility [172]. - The company plans to pursue further acquisition opportunities in the consumer goods packaging market to enhance growth and shareholder value [166]. - The company continues to evaluate acquisition opportunities in the consumer goods packaging market and may incur additional indebtedness to finance such acquisitions [234]. Future Outlook - The company anticipates continued strong demand for its products in 2021, particularly in the metal food container and plastic container segments [170]. - Projected capital expenditures are approximately $230 million in 2021, with annual expenditures expected to range from $200 million to $230 million thereafter [233]. - The company expects cash payments for federal, state, and foreign tax liabilities to be approximately $110 million to $120 million in 2021 [233]. Supply Chain and Risk Management - Approximately 19% of annual net sales in 2020 and 2019 were subject to customer-based supply chain financing arrangements [228]. - Approximately 14% and 18% of the Cost of Goods Sold in the Consolidated Statements of Income for the years ended December 31, 2020, and 2019, respectively, were subject to the Supply Chain Financing (SCF) program [230]. - As of December 31, 2020, outstanding trade accounts payables subject to the SCF program were approximately $225 million [230]. - The company manages exposure to natural gas price fluctuations through natural gas swap agreements, converting market pricing to fixed pricing [258]. - The company does not engage in hedging activities for raw materials due to the ability to pass on price changes to customers [257]. - The company has financed its European operations primarily with borrowings denominated in Euros to minimize foreign currency exchange risk [255].