[x]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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)
|
Large accelerated filer [ X ]
|
Accelerated filer [ ]
|
Non-accelerated filer [ ] (Do not check if a smaller reporting company)
|
Smaller reporting company [ ]
|
SILGAN HOLDINGS INC. | |||
TABLE OF CONTENTS | |||
Page No.
|
|||
Part I. |
3
|
||
Item 1. |
3
|
||
3
|
|||
4
|
|||
5
|
|||
6
|
|||
7
|
|||
8
|
|||
Item 2. |
24
|
||
Item 3. |
33
|
||
Item 4. |
33
|
||
Part II. | Other Information |
34
|
|
Item 6. |
34
|
||
Signatures |
35
|
||
Exhibit Index |
36
|
June 30,
|
June 30,
|
Dec. 31,
|
||||||||||
2011
|
2010
|
2010
|
||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||
Assets
|
||||||||||||
Current assets:
|
||||||||||||
Cash and cash equivalents
|
$ | 127,546 | $ | 52,079 | $ | 175,226 | ||||||
Trade accounts receivable, net
|
431,425 | 306,067 | 214,443 | |||||||||
Inventories
|
742,474 | 563,644 | 438,536 | |||||||||
Prepaid expenses and other current assets
|
54,463 | 17,167 | 36,290 | |||||||||
Total current assets
|
1,355,908 | 938,957 | 864,495 | |||||||||
Property, plant and equipment, net
|
1,085,390 | 842,879 | 849,720 | |||||||||
Goodwill
|
397,829 | 291,724 | 324,763 | |||||||||
Other intangible assets, net
|
97,001 | 53,867 | 72,054 | |||||||||
Other assets, net
|
71,544 | 55,479 | 64,986 | |||||||||
$ | 3,007,672 | $ | 2,182,906 | $ | 2,176,018 | |||||||
Liabilities and Stockholders’ Equity
|
||||||||||||
Current liabilities:
|
||||||||||||
Revolving loans and current
|
||||||||||||
portion of long-term debt
|
$ | 146,602 | $ | 88,372 | $ | 13,949 | ||||||
Trade accounts payable
|
274,959 | 213,175 | 288,858 | |||||||||
Accrued payroll and related costs
|
73,026 | 67,307 | 68,387 | |||||||||
Accrued liabilities
|
171,855 | 54,041 | 52,914 | |||||||||
Total current liabilities
|
666,442 | 422,895 | 424,108 | |||||||||
Long-term debt
|
1,345,827 | 760,465 | 890,725 | |||||||||
Other liabilities
|
359,280 | 279,602 | 307,586 | |||||||||
Stockholders’ equity:
|
||||||||||||
Common stock
|
873 | 870 | 873 | |||||||||
Paid-in capital
|
188,726 | 175,531 | 183,524 | |||||||||
Retained earnings
|
802,643 | 674,928 | 740,923 | |||||||||
Accumulated other comprehensive loss
|
(44,918 | ) | (70,587 | ) | (63,026 | ) | ||||||
Treasury stock
|
(311,201 | ) | (60,798 | ) | (308,695 | ) | ||||||
Total stockholders’ equity
|
636,123 | 719,944 | 553,599 | |||||||||
$ | 3,007,672 | $ | 2,182,906 | $ | 2,176,018 |
2011
|
2010
|
|||||||
Net sales
|
$ | 822,224 | $ | 693,849 | ||||
Cost of goods sold
|
705,331 | 585,253 | ||||||
Gross profit
|
116,893 | 108,596 | ||||||
Selling, general and administrative expenses
|
20,062 | 40,829 | ||||||
Rationalization charges
|
2,369 | 709 | ||||||
Income from operations
|
94,462 | 67,058 | ||||||
Interest and other debt expense
|
16,446 | 11,971 | ||||||
Income before income taxes
|
78,016 | 55,087 | ||||||
Provision for income taxes
|
26,810 | 18,833 | ||||||
Net income
|
$ | 51,206 | $ | 36,254 | ||||
Earnings per share:
|
||||||||
Basic net income per share
|
$ | 0.73 | $ | 0.47 | ||||
Diluted net income per share
|
$ | 0.73 | $ | 0.47 | ||||
Dividends per share
|
$ | 0.11 | $ | 0.11 | ||||
Weighted average number of shares:
|
||||||||
Basic
|
70,145 | 76,701 | ||||||
Effect of dilutive securities
|
368 | 586 | ||||||
Diluted
|
70,513 | 77,287 |
2011
|
2010
|
|||||||
Net sales
|
$ | 1,525,312 | $ | 1,357,885 | ||||
Cost of goods sold
|
1,306,454 | 1,145,986 | ||||||
Gross profit
|
218,858 | 211,899 | ||||||
Selling, general and administrative expenses
|
66,652 | 85,372 | ||||||
Rationalization charges
|
4,101 | 2,763 | ||||||
Income from operations
|
148,105 | 123,764 | ||||||
Interest and other debt expense
|
30,385 | 24,506 | ||||||
Income before income taxes
|
117,720 | 99,258 | ||||||
Provision for income taxes
|
40,400 | 36,222 | ||||||
Net income
|
$ | 77,320 | $ | 63,036 | ||||
Earnings per share:
|
||||||||
Basic net income per share
|
$ | 1.10 | $ | 0.82 | ||||
Diluted net income per share
|
$ | 1.10 | $ | 0.82 | ||||
Dividends per share
|
$ | 0.22 | $ | 0.21 | ||||
Weighted average number of shares:
|
||||||||
Basic
|
70,064 | 76,665 | ||||||
Effect of dilutive securities
|
443 | 603 | ||||||
Diluted
|
70,507 | 77,268 |
2011
|
2010
|
|||||||
Cash flows provided by (used in) operating activities:
|
||||||||
Net income
|
$ | 77,320 | $ | 63,036 | ||||
Adjustments to reconcile net income to net cash
|
||||||||
used in operating activities:
|
||||||||
Depreciation and amortization
|
79,439 | 72,522 | ||||||
Rationalization charges
|
4,101 | 2,763 | ||||||
Excess tax benefit from stock-based compensation
|
(1,700 | ) | (452 | ) | ||||
Other changes that provided (used) cash, net of
|
||||||||
effects from acquisitions:
|
||||||||
Trade accounts receivable, net
|
(120,431 | ) | (118,896 | ) | ||||
Inventories
|
(199,382 | ) | (184,957 | ) | ||||
Trade accounts payable
|
42,640 | 34,275 | ||||||
Accrued liabilities
|
48,966 | 4,443 | ||||||
Contributions to pension benefit plans
|
- | (92,287 | ) | |||||
Other, net
|
16,576 | 47,078 | ||||||
Net cash used in operating activities
|
(52,471 | ) | (172,475 | ) | ||||
Cash flows provided by (used in) investing activities:
|
||||||||
Purchases of businesses, net of cash acquired
|
(264,367 | ) | - | |||||
Capital expenditures
|
(84,170 | ) | (48,104 | ) | ||||
Proceeds from asset sales
|
3,129 | 548 | ||||||
Net cash used in investing activities
|
(345,408 | ) | (47,556 | ) | ||||
Cash flows provided by (used in) financing activities:
|
||||||||
Borrowings under revolving loans
|
810,114 | 203,412 | ||||||
Repayments under revolving loans
|
(321,030 | ) | (127,590 | ) | ||||
Proceeds from issuance of long-term debt
|
4,210 | - | ||||||
Repayments of long-term debt
|
(25,213 | ) | - | |||||
Changes in outstanding checks - principally vendors
|
(99,557 | ) | (92,531 | ) | ||||
Dividends paid on common stock
|
(15,600 | ) | (16,342 | ) | ||||
Proceeds from stock option exercises
|
394 | 157 | ||||||
Excess tax benefit from stock-based compensation
|
1,700 | 452 | ||||||
Repurchase of treasury shares
|
(4,819 | ) | (1,202 | ) | ||||
Net cash provided by (used in) financing activities
|
350,199 | (33,644 | ) | |||||
Cash and cash equivalents:
|
||||||||
Net decrease
|
(47,680 | ) | (253,675 | ) | ||||
Balance at beginning of year
|
175,226 | 305,754 | ||||||
Balance at end of period
|
$ | 127,546 | $ | 52,079 | ||||
Interest paid, net
|
$ | 28,797 | $ | 23,777 | ||||
Income taxes (refunded) paid, net
|
(3,386 | ) | 4,410 |
Accumulated
|
|
|||||||||||||||||||||||||||
Common Stock
|
Other
|
Total
|
||||||||||||||||||||||||||
Shares
|
Par
|
Paid-in
|
Retained
|
Comprehensive
|
Treasury
|
Stockholders’
|
||||||||||||||||||||||
Outstanding
|
Value
|
Capital
|
Earnings
|
(Loss) Income
|
Stock
|
Equity
|
||||||||||||||||||||||
Balance at December 31, 2009
|
38,284 | $ | 435 | $ | 173,176 | $ | 628,234 | $ | (55,601 | ) | $ | (60,482 | ) | $ | 685,762 | |||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net income
|
- | - | - | 63,036 | - | - | 63,036 | |||||||||||||||||||||
Changes in net prior service
|
||||||||||||||||||||||||||||
credit and actuarial losses,
|
||||||||||||||||||||||||||||
net of tax provision of $1,606
|
- | - | - | - | 2,486 | - | 2,486 | |||||||||||||||||||||
Change in fair value of derivatives,
|
||||||||||||||||||||||||||||
net of tax benefit of $76
|
- | - | - | - | (138 | ) | - | (138 | ) | |||||||||||||||||||
Foreign currency translation,
|
||||||||||||||||||||||||||||
net of tax provision of $10,948
|
- | - | - | - | (17,334 | ) | - | (17,334 | ) | |||||||||||||||||||
Comprehensive income
|
48,050 | |||||||||||||||||||||||||||
Dividends declared on common stock
|
- | - | - | (16,342 | ) | - | - | (16,342 | ) | |||||||||||||||||||
Stock compensation expense
|
- | - | 3,023 | - | - | - | 3,023 | |||||||||||||||||||||
Stock option exercises, including
|
||||||||||||||||||||||||||||
tax benefit of $166
|
15 | - | 323 | - | - | - | 323 | |||||||||||||||||||||
Net issuance of treasury stock for
|
||||||||||||||||||||||||||||
vested restricted stock units,
|
||||||||||||||||||||||||||||
including tax benefit of $330
|
47 | - | (556 | ) | - | - | (316 | ) | (872 | ) | ||||||||||||||||||
Two-for-one stock split, net of
|
||||||||||||||||||||||||||||
treasury shares of 5,171
|
38,332 | 435 | (435 | ) | - | - | - | - | ||||||||||||||||||||
Balance at June 30, 2010
|
76,678 | $ | 870 | $ | 175,531 | $ | 674,928 | $ | (70,587 | ) | $ | (60,798 | ) | $ | 719,944 | |||||||||||||
Balance at December 31, 2010
|
69,876 | $ | 873 | $ | 183,524 | $ | 740,923 | $ | (63,026 | ) | $ | (308,695 | ) | $ | 553,599 | |||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net income
|
- | - | - | 77,320 | - | - | 77,320 | |||||||||||||||||||||
Changes in net prior service
|
||||||||||||||||||||||||||||
credit and actuarial losses,
|
||||||||||||||||||||||||||||
net of tax provision of $1,526
|
- | - | - | - | 2,479 | - | 2,479 | |||||||||||||||||||||
Change in fair value of derivatives,
|
||||||||||||||||||||||||||||
net of tax provision of $1,074
|
- | - | - | - | 1,483 | - | 1,483 | |||||||||||||||||||||
Foreign currency translation,
|
||||||||||||||||||||||||||||
net of tax benefit of $12,818
|
- | - | - | - | 14,146 | - | 14,146 | |||||||||||||||||||||
Comprehensive income
|
95,428 | |||||||||||||||||||||||||||
Dividends declared on common stock
|
- | - | - | (15,600 | ) | - | - | (15,600 | ) | |||||||||||||||||||
Stock compensation expense
|
- | - | 4,742 | - | - | - | 4,742 | |||||||||||||||||||||
Stock option exercises, including
|
||||||||||||||||||||||||||||
tax benefit of $679
|
46 | - | 1,073 | - | - | - | 1,073 | |||||||||||||||||||||
Net issuance of treasury stock for
|
||||||||||||||||||||||||||||
vested restricted stock units,
|
||||||||||||||||||||||||||||
including tax benefit of $1,700
|
216 | - | (613 | ) | - | - | (2,506 | ) | (3,119 | ) | ||||||||||||||||||
Balance at June 30, 2011
|
70,138 | $ | 873 | $ | 188,726 | $ | 802,643 | $ | (44,918 | ) | $ | (311,201 | ) | $ | 636,123 |
Trade accounts receivable
|
$ | 81,626 | ||
Inventories
|
93,050 | |||
Property, plant and equipment
|
212,465 | |||
Other intangible assets
|
22,732 | |||
Other assets
|
3,374 | |||
Trade accounts payable and accrued liabilities
|
(56,516 | ) | ||
Debt
|
(80,601 | ) | ||
Other liabilities
|
(87,367 | ) | ||
Total identifiable net assets
|
188,763 | |||
Goodwill
|
54,925 | |||
Cash paid at closing, net of cash acquired
|
$ | 243,688 |
Three Months Ended
|
Six Months Ended
|
||||||||||||||||
June 30,
|
June 30,
|
June 30,
|
June 30,
|
||||||||||||||
2011
|
2010
|
2011
|
2010
|
||||||||||||||
(Dollars in thousands, except per share data)
|
|||||||||||||||||
Net sales
|
$ | 822,224 | $ | 761,859 | $ | 1,570,831 | $ | 1,494,239 | |||||||||
Net income
|
$ | 53,589 | $ | 39,507 | $ | 81,625 | $ | 63,571 | |||||||||
Earnings per share:
|
|||||||||||||||||
Basic net income per share
|
$ | 0.76 | $ | 0.52 | $ | 1.17 | $ | 0.83 | |||||||||
Diluted net income per share
|
$ | 0.76 | $ | 0.51 | $ | 1.16 | $ | 0.82 |
Employee
|
Plant
|
Non-Cash
|
||||||||||||||
Severance
|
Exit
|
Asset
|
||||||||||||||
and Benefits
|
Costs
|
Write-Down
|
Total
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Balance at December 31, 2010
|
$ | 11,056 | $ | 217 | $ | - | $ | 11,273 | ||||||||
Activity for the Six Months Ended June 30, 2011
|
||||||||||||||||
Prior Years’ Rationalization Plan Reserves Established
|
1,990 | 616 | 1,495 | 4,101 | ||||||||||||
Prior Years’ Rationalization Plan Reserves Utilized
|
(4,254 | ) | (455 | ) | (1,495 | ) | (6,204 | ) | ||||||||
Currency Translation
|
800 | - | - | 800 | ||||||||||||
Total Activity
|
(1,464 | ) | 161 | - | (1,303 | ) | ||||||||||
Balance at June 30, 2011
|
$ | 9,592 | $ | 378 | $ | - | $ | 9,970 |
June 30,
|
June 30,
|
Dec. 31,
|
|||||||||||
2011
|
2010
|
2010
|
|||||||||||
(Dollars in thousands)
|
|||||||||||||
Accrued liabilities
|
$ | 9,970 | $ | 1,911 | $ | 11,273 | |||||||
Other liabilities
|
- | 2,779 | - | ||||||||||
$ | 9,970 | $ | 4,690 | $ | 11,273 |
June 30,
|
June 30,
|
Dec. 31,
|
||||||||||
2011
|
2010
|
2010
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Foreign currency translation
|
$ | 31,422 | $ | 4,758 | $ | 17,276 | ||||||
Change in fair value of derivatives
|
(5,212 | ) | (8,033 | ) | (6,695 | ) | ||||||
Unrecognized net periodic pension and
|
||||||||||||
other postretirement benefit costs:
|
||||||||||||
Net prior service credit
|
6,238 | 6,647 | 6,391 | |||||||||
Net actuarial loss
|
(77,366 | ) | (73,959 | ) | (79,998 | ) | ||||||
Accumulated other comprehensive loss
|
$ | (44,918 | ) | $ | (70,587 | ) | $ | (63,026 | ) |
June 30,
|
June 30,
|
Dec. 31,
|
||||||||||
2011
|
2010
|
2010
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Raw materials
|
$ | 172,186 | $ | 106,273 | $ | 133,594 | ||||||
Work-in-process
|
122,771 | 86,936 | 83,375 | |||||||||
Finished goods
|
502,579 | 436,800 | 276,578 | |||||||||
Other
|
13,887 | 12,539 | 13,938 | |||||||||
811,423 | 642,548 | 507,485 | ||||||||||
Adjustment to value inventory
|
||||||||||||
at cost on the LIFO method
|
(68,949 | ) | (78,904 | ) | (68,949 | ) | ||||||
$ | 742,474 | $ | 563,644 | $ | 438,536 |
June 30,
|
June 30,
|
Dec. 31,
|
||||||||||
2011
|
2010
|
2010
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Bank debt
|
||||||||||||
Bank revolving loans
|
$ | 462,839 | $ | 76,000 | $ | - | ||||||
U.S. term loans
|
400,000 | 81,765 | 400,000 | |||||||||
Canadian term loans
|
82,296 | 78,214 | 81,000 | |||||||||
Euro term loans
|
179,812 | 156,463 | 165,313 | |||||||||
Other foreign bank revolving and term loans
|
122,665 | 12,372 | 13,949 | |||||||||
Total bank debt
|
1,247,612 | 404,814 | 660,262 | |||||||||
7¼% Senior Notes, net of unamortized discount
|
244,817 | 244,023 | 244,412 | |||||||||
6¾% Senior Subordinated Notes
|
- | 200,000 | - | |||||||||
Total debt
|
1,492,429 | 848,837 | 904,674 | |||||||||
Less current portion
|
146,602 | 88,372 | 13,949 | |||||||||
$ | 1,345,827 | $ | 760,465 | $ | 890,725 |
Year
|
U.S. Term Loans
|
Euro Term Loans
|
Canadian Term Loans
|
||||||
2013
|
$78,000 | € 50,250 |
Cdn $12,150
|
||||||
2014
|
$78,000 | € 50,250 |
Cdn $12,150
|
||||||
2015
|
$104,000 | € 67,000 |
Cdn $16,200
|
||||||
2016
|
$104,000 | € 67,000 |
Cdn $16,200
|
||||||
2017
|
$156,000 | €100,500 |
Cdn $24,300
|
Carrying
|
Fair
|
|||||||||
Amount
|
Value
|
|||||||||
(Dollars in thousands)
|
||||||||||
Assets:
|
||||||||||
Cash and cash equivalents
|
$ | 127,546 | $ | 127,546 | ||||||
Liabilities:
|
||||||||||
Bank debt
|
1,247,612 | 1,247,612 | ||||||||
7¼% Senior Notes
|
244,817 | 267,500 | ||||||||
Interest rate swap agreements
|
9,185 | 9,185 | ||||||||
Natural gas swap agreements
|
46 | 46 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
June 30,
|
June 30,
|
|||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Service cost
|
$ | 3,740 | $ | 3,075 | $ | 7,510 | $ | 6,785 | ||||||||
Interest cost
|
7,144 | 6,995 | 14,314 | 14,020 | ||||||||||||
Expected return on plan assets
|
(10,186 | ) | (9,377 | ) | (20,400 | ) | (16,793 | ) | ||||||||
Amortization of prior service cost
|
510 | 515 | 1,021 | 1,033 | ||||||||||||
Amortization of actuarial losses
|
1,993 | 2,282 | 3,985 | 4,199 | ||||||||||||
Net periodic benefit cost
|
$ | 3,201 | $ | 3,490 | $ | 6,430 | $ | 9,244 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
June 30,
|
June 30,
|
|||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Service cost
|
$ | 259 | $ | 244 | $ | 518 | $ | 466 | ||||||||
Interest cost
|
658 | 695 | 1,315 | 1,403 | ||||||||||||
Amortization of prior service credit
|
(643 | ) | (641 | ) | (1,285 | ) | (1,283 | ) | ||||||||
Amortization of actuarial losses
|
142 | 53 | 284 | 143 | ||||||||||||
Net periodic benefit cost
|
$ | 416 | $ | 351 | $ | 832 | $ | 729 |
Metal
|
Plastic
|
|||||||||||||||||||
Containers(1)
|
Closures
|
Containers
|
Corporate
|
Total
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
Three Months Ended June 30, 2011
|
||||||||||||||||||||
Net sales
|
$ | 482,258 | $ | 184,538 | $ | 155,428 | $ | - | $ | 822,224 | ||||||||||
Depreciation and amortization(2)
|
20,160 | 8,604 | 11,191 | 424 | 40,379 | |||||||||||||||
Rationalization charges
|
1,378 | 317 | 674 | - | 2,369 | |||||||||||||||
Segment income from operations(3) (4)
|
42,874 | 22,681 | 4,512 | 24,395 | 94,462 | |||||||||||||||
Three Months Ended June 30, 2010
|
||||||||||||||||||||
Net sales
|
$ | 378,063 | $ | 165,773 | $ | 150,013 | $ | - | $ | 693,849 | ||||||||||
Depreciation and amortization(2)
|
16,881 | 6,929 | 11,573 | 419 | 35,802 | |||||||||||||||
Rationalization charges
|
314 | - | 395 | - | 709 | |||||||||||||||
Segment income from operations
|
44,034 | 23,955 | 3,969 | (4,900 | ) | 67,058 | ||||||||||||||
Six Months Ended June 30, 2011
|
||||||||||||||||||||
Net sales
|
$ | 872,742 | $ | 344,580 | $ | 307,990 | $ | - | $ | 1,525,312 | ||||||||||
Depreciation and amortization(2)
|
37,983 | 16,720 | 22,308 | 847 | 77,858 | |||||||||||||||
Rationalization charges
|
1,378 | 1,392 | 1,331 | - | 4,101 | |||||||||||||||
Segment income from operations(3) (4)
|
81,238 | 38,498 | 10,827 | 17,542 | 148,105 | |||||||||||||||
Six Months Ended June 30, 2010
|
||||||||||||||||||||
Net sales
|
$ | 753,115 | $ | 309,819 | $ | 294,951 | $ | - | $ | 1,357,885 | ||||||||||
Depreciation and amortization(2)
|
33,602 | 14,059 | 22,738 | 838 | 71,237 | |||||||||||||||
Rationalization charges
|
314 | - | 2,449 | - | 2,763 | |||||||||||||||
Segment income from operations(5)
|
90,424 | 35,050 | 6,874 | (8,584 | ) | 123,764 |
(1)
|
Our metal containers segment includes the operations formerly categorized as metal food containers and the VN operations acquired in March 2011.
|
(2)
|
Depreciation and amortization excludes amortization of debt discount and issuance costs of $0.8 million and $0.6 million for the three months ended June 30, 2011 and 2010, respectively, and $1.6 million and $1.3 million for the six months ended June 30, 2011 and 2010, respectively.
|
(3)
|
Income from operations for corporate includes income of $27.0 million and $25.2 million for the three and six months ended June 30, 2011, respectively, for proceeds received as a result of the termination of the Graham Packaging merger agreement, net of costs associated with certain corporate development activities.
|
(4)
|
Income from operations of the metal containers segment includes a charge for the resolution of a past product liability dispute of $3.3 million for the three and six months ended June 30, 2011.
|
(5)
|
Income from operations for the closures segment includes a charge of $3.2 million for the remeasurement of net assets in the Venezuela operations to the devalued official Bolivar exchange rate.
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||||
June 30,
|
June 30,
|
June 30,
|
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||
Total segment income from operations
|
$ | 94,462 | $ | 67,058 | $ | 148,105 | $ | 123,764 | ||||||||||
Interest and other debt expense
|
16,446 | 11,971 | 30,385 | 24,506 | ||||||||||||||
Income before income taxes
|
$ | 78,016 | $ | 55,087 | $ | 117,720 | $ | 99,258 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
June 30,
|
June 30,
|
|||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Net sales
|
||||||||||||||||
Metal containers(1)
|
58.7 | % | 54.5 | % | 57.2 | % | 55.5 | % | ||||||||
Closures
|
22.4 | 23.9 | 22.6 | 22.8 | ||||||||||||
Plastic containers
|
18.9 | 21.6 | 20.2 | 21.7 | ||||||||||||
Consolidated
|
100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||
Cost of goods sold
|
85.8 | 84.3 | 85.6 | 84.4 | ||||||||||||
Gross profit
|
14.2 | 15.7 | 14.4 | 15.6 | ||||||||||||
Selling, general and administrative expenses
|
2.4 | 5.9 | 4.4 | 6.3 | ||||||||||||
Rationalization charges
|
0.3 | 0.1 | 0.3 | 0.2 | ||||||||||||
Income from operations
|
11.5 | 9.7 | 9.7 | 9.1 | ||||||||||||
Interest and other debt expense
|
2.0 | 1.7 | 2.0 | 1.8 | ||||||||||||
Income before income taxes
|
9.5 | 8.0 | 7.7 | 7.3 | ||||||||||||
Provision for income taxes
|
3.3 | 2.8 | 2.6 | 2.7 | ||||||||||||
Net income
|
6.2 | % | 5.2 | % | 5.1 | % | 4.6 | % |
(1)
|
Our metal containers segment includes the operations formerly categorized as metal food containers and the VN operations acquired in March 2011.
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
June 30,
|
June 30,
|
|||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(Dollars in millions)
|
||||||||||||||||
Net sales
|
||||||||||||||||
Metal containers(1)
|
$ | 482.3 | $ | 378.1 | $ | 872.7 | $ | 753.1 | ||||||||
Closures
|
184.5 | 165.8 | 344.6 | 309.8 | ||||||||||||
Plastic containers
|
155.4 | 150.0 | 308.0 | 295.0 | ||||||||||||
Consolidated
|
$ | 822.2 | $ | 693.9 | $ | 1,525.3 | $ | 1,357.9 | ||||||||
Income from operations
|
||||||||||||||||
Metal containers (1) (2)
|
$ | 42.9 | $ | 44.0 | $ | 81.2 | $ | 90.4 | ||||||||
Closures (3)
|
22.7 | 24.0 | 38.5 | 35.1 | ||||||||||||
Plastic containers (4)
|
4.5 | 4.0 | 10.8 | 6.9 | ||||||||||||
Corporate(5)
|
24.4 | (4.9 | ) | 17.6 | (8.6 | ) | ||||||||||
Consolidated
|
$ | 94.5 | $ | 67.1 | $ | 148.1 | $ | 123.8 |
(1)
|
Our metal containers segment includes the operations formerly categorized as metal food containers and the VN operations acquired in March 2011.
|
(2)
|
Includes rationalization charges of $1.4 million for each of the three and six months ended June 30, 2011 and $0.3 million for each of the three and six months ended June 30, 2010, and a charge for the resolution of a past product liability dispute of $3.3 million for the three and six months ended June 30, 2011.
|
(3)
|
Includes rationalization charges of $0.3 million and $1.4 million for the three and six months ended June 30, 2011, respectively, and a charge of $3.2 million for the remeasurement of net assets in the Venezuela operations for the six months ended June 30, 2010.
|
(4)
|
Includes rationalization charges of $0.7 million and $0.4 million for the three months ended June 30, 2011 and 2010, respectively, and $1.3 million and $2.4 million for the six months ended June 30, 2011 and 2010, respectively.
|
(5)
|
Includes income of $27.0 million and $25.2 million for the three and six months ended June 30, 2011, respectively, for proceeds received as a result of the termination of the Graham Packaging merger agreement, net of costs associated with certain corporate development activities.
|
Exhibit Number
|
Description
|
|
12
|
Ratio of Earnings to Fixed Charges for the three and six months ended June 30, 2011 and 2010.
|
|
31.1
|
Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
|
|
31.2
|
Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
|
|
32.1
|
Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
|
|
32.2
|
Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
|
|
101.INS*
|
XBRL Instance Document.
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document.
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
*
|
XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections, is not part of any registration statement or prospectus to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.
|
SILGAN HOLDINGS INC.
|
|||
Dated: August 9, 2011 | |||
|
|
/s/ Robert B. Lewis | |
Robert B. Lewis
|
|||
Executive Vice President and
|
|||
Chief Financial Officer
|
EXHIBIT INDEX | ||
EXHIBIT NO.
|
EXHIBIT
|
|
12
|
Ratio of Earnings to Fixed Charges for the three and six months ended June 30, 2011 and 2010.
|
|
31.1
|
Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
|
|
31.2
|
Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
|
|
32.1
|
Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
|
|
32.2
|
Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
|
|
101.INS*
|
XBRL Instance Document.
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document.
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
*
|
XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections, is not part of any registration statement or prospectus to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
June 30,
|
June 30,
|
|||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Earnings before fixed charges:
|
||||||||||||||||
Income before income taxes
|
$ | 78,016 | $ | 55,087 | $ | 117,720 | $ | 99,258 | ||||||||
Interest and other debt expense
|
16,446 | 11,971 | 30,385 | 24,506 | ||||||||||||
Interest portion of rental expense
|
214 | 83 | 370 | 167 | ||||||||||||
Earnings before fixed charges
|
$ | 94,676 | $ | 67,141 | $ | 148,475 | $ | 123,931 | ||||||||
Fixed charges:
|
||||||||||||||||
Interest and other debt expense
|
$ | 16,446 | $ | 11,971 | $ | 30,385 | $ | 24,506 | ||||||||
Interest portion of rental expense
|
214 | 83 | 370 | 167 | ||||||||||||
Capitalized interest
|
173 | 74 | 360 | 195 | ||||||||||||
Total fixed charges
|
$ | 16,833 | $ | 12,128 | $ | 31,115 | $ | 24,868 | ||||||||
Ratio of earnings to fixed charges
|
5.62 | 5.54 | 4.77 | 4.98 |
1.
|
I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2011 of Silgan Holdings Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 9, 2011 | |||
|
/s/ Anthony J. Allott | ||
Anthony J. Allott
|
|||
President and
|
|||
Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2011 of Silgan Holdings Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 9, 2011 | |||
|
/s/ Robert B. Lewis | ||
Robert B. Lewis
|
|||
Executive Vice President and
|
|||
Chief Financial Officer
|
(1) The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Anthony J. Allott
|
Anthony J. Allott
|
President and
|
Chief Executive Officer
|
(1) The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Robert B. Lewis
|
Robert B. Lewis
|
Executive Vice President and
|
Chief Financial Officer
|
Subsequent Event - Additional Information (Detail) (Refinancing of Debt)
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Refinancing of Debt
|
|
Subsequent Event [Line Items] | |
Date of refinancing, senior secured credit facility | Jul. 28, 2011 |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Per Share data |
3 Months Ended | 6 Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
||||||||||
Net sales | $ 822,224 | $ 693,849 | $ 1,525,312 | $ 1,357,885 | |||||||||
Cost of goods sold | 705,331 | 585,253 | 1,306,454 | 1,145,986 | |||||||||
Gross profit | 116,893 | 108,596 | 218,858 | 211,899 | |||||||||
Selling, general and administrative expenses | 20,062 | 40,829 | 66,652 | 85,372 | |||||||||
Rationalization charges | 2,369 | 709 | 4,101 | 2,763 | |||||||||
Income from operations | 94,462 | [1],[2] | 67,058 | 148,105 | [1],[2] | 123,764 | [3] | ||||||
Interest and other debt expense | 16,446 | 11,971 | 30,385 | 24,506 | |||||||||
Income before income taxes | 78,016 | 55,087 | 117,720 | 99,258 | |||||||||
Provision for income taxes | 26,810 | 18,833 | 40,400 | 36,222 | |||||||||
Net income | $ 51,206 | $ 36,254 | $ 77,320 | $ 63,036 | |||||||||
Earnings per share: | |||||||||||||
Basic net income per share | $ 0.73 | $ 0.47 | $ 1.10 | $ 0.82 | |||||||||
Diluted net income per share | $ 0.73 | $ 0.47 | $ 1.10 | $ 0.82 | |||||||||
Dividends per share | $ 0.11 | $ 0.11 | $ 0.22 | $ 0.21 | |||||||||
Weighted average number of shares: | |||||||||||||
Basic | 70,145 | 76,701 | 70,064 | 76,665 | |||||||||
Effect of dilutive securities | 368 | 586 | 443 | 603 | |||||||||
Diluted | 70,513 | 77,287 | 70,507 | 77,268 | |||||||||
|
Rationalization Charges (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity in Rationalization Reserves | Activity
in our rationalization reserves since December 31, 2010 is
summarized as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rationalization Reserves Included in the Condensed Consolidated Balance Sheets | Rationalization
reserves are included in the Condensed Consolidated Balance Sheets
as follows:
|
Document and Entity Information
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Jul. 29, 2011
|
|
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2011 | |
Document Fiscal Year Focus | 2011 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | SLGN | |
Entity Registrant Name | SILGAN HOLDINGS INC. | |
Entity Central Index Key | 0000849869 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 70,138,336 |
Reportable Business Segment Information (Parenthetical) (Detail) (USD $)
In Millions |
3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 1 Months Ended | |||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
Corporate
|
Jun. 30, 2011
Corporate
|
Jun. 30, 2011
Metal Containers
|
Jun. 30, 2011
Metal Containers
|
Jun. 30, 2011
Closures
|
Mar. 01, 2011
Vogel & Noot Holding AG
|
|
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||||||||
Date of acquisition, VN operations | 2011-03-01 | |||||||||
Amortization of debt discount and issuance costs excluded from depreciation and amortization | $ 0.8 | $ 0.6 | $ 1.6 | $ 1.3 | ||||||
Income as result of proceeds received from termination of the Graham Packaging merger agreement net of costs | 27.0 | 25.2 | ||||||||
Charge related to resolution of past product liability dispute | 3.3 | 3.3 | ||||||||
Charge included for the remeasurement of net assets | $ 3.2 |
Long-Term Debt (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Long-Term Debt | Long-term
debt consisted of the following:
|
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Term Loans Mature on July 28, 2017 and Payable in Installments | The
Term Loans mature on July 28, 2017 and are payable in installments
as follows (amounts in thousands):
|
Reportable Business Segment Information (Detail) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|||||||||||||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||||||||||||||||
Net sales | $ 822,224 | $ 693,849 | $ 1,525,312 | $ 1,357,885 | ||||||||||||||
Depreciation and amortization | 40,379 | [1] | 35,802 | [1] | 77,858 | [1] | 71,237 | [1] | ||||||||||
Rationalization charges | 2,369 | 709 | 4,101 | 2,763 | ||||||||||||||
Segment income from operations | 94,462 | [2],[3] | 67,058 | 148,105 | [2],[3] | 123,764 | [4] | |||||||||||
Metal Containers
|
||||||||||||||||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||||||||||||||||
Net sales | 482,258 | [5] | 378,063 | [5] | 872,742 | [5] | 753,115 | [5] | ||||||||||
Depreciation and amortization | 20,160 | [1],[5] | 16,881 | [1],[5] | 37,983 | [1],[5] | 33,602 | [1],[5] | ||||||||||
Rationalization charges | 1,378 | [5] | 314 | [5] | 1,378 | [5] | 314 | [5] | ||||||||||
Segment income from operations | 42,874 | [2],[3],[5] | 44,034 | [5] | 81,238 | [2],[3],[5] | 90,424 | [4],[5] | ||||||||||
Closures
|
||||||||||||||||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||||||||||||||||
Net sales | 184,538 | 165,773 | 344,580 | 309,819 | ||||||||||||||
Depreciation and amortization | 8,604 | [1] | 6,929 | [1] | 16,720 | [1] | 14,059 | [1] | ||||||||||
Rationalization charges | 317 | 1,392 | ||||||||||||||||
Segment income from operations | 22,681 | [2],[3] | 23,955 | 38,498 | [2],[3] | 35,050 | [4] | |||||||||||
Plastic Containers
|
||||||||||||||||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||||||||||||||||
Net sales | 155,428 | 150,013 | 307,990 | 294,951 | ||||||||||||||
Depreciation and amortization | 11,191 | [1] | 11,573 | [1] | 22,308 | [1] | 22,738 | [1] | ||||||||||
Rationalization charges | 674 | 395 | 1,331 | 2,449 | ||||||||||||||
Segment income from operations | 4,512 | [2],[3] | 3,969 | 10,827 | [2],[3] | 6,874 | [4] | |||||||||||
Corporate
|
||||||||||||||||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||||||||||||||||
Depreciation and amortization | 424 | [1] | 419 | [1] | 847 | [1] | 838 | [1] | ||||||||||
Segment income from operations | $ 24,395 | [2],[3] | $ (4,900) | $ 17,542 | [2],[3] | $ (8,584) | [4] | |||||||||||
|
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Long-Term Debt
|
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Jun. 30, 2011
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Long-Term Debt |
Note 6. Long-Term Debt
Long-term
debt consisted of the following:
Bank Credit Agreement
On
July 28, 2011, we completed the refinancing of our previous senior
secured credit facility by entering into a new $1.9 billion senior
secured credit facility, or the Credit Agreement. Our
Credit Agreement provides us with term loans and revolving
loans. The term loans, or the Term Loans, provided under
the Credit Agreement refinanced the term loans under our previous
senior secured credit facility and certain Euro revolving loan
borrowings used to finance the Vogel & Noot acquisition in
March 2011 and certain U.S. dollar revolving loan borrowings under
our previous senior secured credit facility. The Term
Loans consist of $520 million of U.S. term loans, €335
million of Euro term loans and Cdn $81 million of Canadian term
loans. The revolving loans, or the Revolving Loans,
consist of a $790 million multicurrency revolving loan facility and
a Cdn $10 million Canadian revolving loan facility. Our
Credit Agreement also provides us with an uncommitted multicurrency
incremental loan facility for up to an additional U.S. $750
million, which may be used to finance acquisitions and for other
permitted purposes.
We
may use Revolving Loans under the Credit Agreement for working
capital and other general corporate purposes, including
acquisitions, dividends, stock repurchases and refinancing of other
debt. Revolving Loans may be borrowed, repaid and
reborrowed until their final maturity on July 28,
2016. The Term Loans mature on July 28, 2017 and are
payable in installments as follows (amounts in
thousands):
The
final maturity date for the Revolving Loans and Term Loans will be
July 7, 2016 if our 7¼% Senior Notes have not been refinanced
in full on or before July 7, 2016.
The
Credit Agreement requires us to prepay the Term Loans with proceeds
received from certain assets sales and, under certain
circumstances, with 50 percent of our excess cash
flow. The mandatory repayment provisions are no more
restrictive in the aggregate than under our previous senior secured
credit facility. Generally, mandatory repayments
of Term Loans are allocated pro rata to each of the Term Loans and
applied first to the scheduled amortization payments in the year of
such prepayments and, to the extent in excess thereof, pro rata to
the remaining installments of the Term Loans. Voluntary
prepayments of Term Loans may be applied to any tranche of Term
Loans at our discretion and are applied first to the scheduled
amortization payments in the year of such prepayment and, to the
extent in excess thereof, pro rata to the remaining
installments. Amounts repaid under the Term Loans may
not be reborrowed.
The
uncommitted multicurrency incremental loan facility provides, among
other things, that any incremental term loan borrowing shall be
denominated in a single currency, either U.S. dollars or certain
foreign currencies; have a maturity date no earlier than the
maturity date for the Term Loans; and be used for working capital
and general corporate purposes, including to finance acquisitions,
to refinance any indebtedness assumed as part of such acquisitions,
to pay dividends, to repurchase common stock, to refinance or
repurchase debt as permitted and to repay outstanding Revolving
Loans.
Under
the Credit Agreement, the interest rate for U.S. term loans will be
either LIBOR or the base rate under the Credit Agreement plus a
margin, the interest rate for Euro term loans will be the Euribor
rate under the Credit Agreement plus a margin and the interest rate
for Canadian term loans will be either the Bankers’
Acceptance discount rate or the Canadian prime rate under the
Credit Agreement plus a margin. Initially, for Term
Loans and Revolving Loans maintained as LIBOR, Euribor or
Bankers’ Acceptance loans the margin will be 1.75 percent,
and for Term Loans and Revolving Loans maintained as base rate or
Canadian prime rate loans the margin will be 0.75
percent. The Credit Agreement provides for the payment
of a commitment fee ranging from 0.25 percent to 0.375 percent per
annum on the daily average unused portion of commitments available
under the Revolving Loans. Initially, the commitment fee
will be 0.375 percent per annum. The margins for Term Loans and
Revolving Loans and the commitment fee are subject to adjustment
quarterly based upon our Total Leverage Ratio as provided in the
Credit Agreement.
We
may utilize up to a maximum of $200 million of our multicurrency
revolving loan facility under the Credit Agreement for letters of
credit as long as the aggregate amount of borrowings of Revolving
Loans and letters of credit under such multicurrency revolving loan
facility do not exceed the amount of the commitment under such
multicurrency revolving loan facility. The Credit
Agreement provides for payment to the applicable lenders of a
letter of credit fee equal to the applicable margin in effect for
Revolving Loans and to the issuers of the letters of credit of a
facing fee of the greater of (x) $500 per annum and (y) 0.25
percent per annum, calculated on the aggregate stated amount of all
letters of credit for their stated duration.
The
indebtedness under the Credit Agreement is guaranteed by Silgan and
certain of its U.S. and Canadian subsidiaries. The stock of certain
of our subsidiaries has also been pledged as security to the
lenders under the Credit Agreement. The Credit Agreement
contains certain financial and operating covenants which limit,
subject to certain exceptions, among other things, our ability to
incur additional indebtedness; create liens; consolidate, merge or
sell assets; make certain advances, investments or loans; enter
into certain transactions with affiliates; engage in any business
other than the packaging business; pay dividends; and repurchase
stock. In addition, we are required to meet specified
financial covenants including Interest Coverage and Total Leverage
Ratios, each as defined in the Credit Agreement. We are
currently in compliance with all covenants under the Credit
Agreement.
All
amounts owing under our previous senior secured credit facility
were repaid on July 28, 2011 with proceeds from the Credit
Agreement. As a result of this refinancing, we expect to
record a pre-tax charge of approximately $1.0 million for the loss
on early extinguishment of debt during the quarter ending September
30, 2011.
Amounts
outstanding as of June 30, 2011 classified as current debt included
$40.7 million of bank revolving loans and $105.9 million of foreign
bank revolving loans and term loans. Bank revolving
loans of $422.1 million, consisting of $120.0 million of U.S.
dollar denominated revolving loans and €210.0 million ($302.1
million translated at the U.S. dollar exchange rate at the balance
sheet date) of Euro denominated revolving loans, are classified as
long-term in the Condensed Consolidated Balance Sheet at June 30,
2011 because we refinanced such revolving loans with term loans
having maturities of greater than one year under the Credit
Agreement.
|
Financial Instruments (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Summary of Carrying Amounts and Estimated Fair Values of Other Financial Instruments | The
following table summarizes the carrying amounts and estimated fair
values of our other financial instruments at June 30,
2011:
|
Components of Net Periodic Other Postretirement Benefit Costs (Detail) (Other Postretirement Benefits, USD $)
In Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Other Postretirement Benefits
|
||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | $ 259 | $ 244 | $ 518 | $ 466 |
Interest cost | 658 | 695 | 1,315 | 1,403 |
Amortization of prior service credit | (643) | (641) | (1,285) | (1,283) |
Amortization of actuarial losses | 142 | 53 | 284 | 143 |
Net periodic benefit cost | $ 416 | $ 351 | $ 832 | $ 729 |
Long-Term Debt - Additional Information (Detail)
|
6 Months Ended | 6 Months Ended | 6 Months Ended | 6 Months Ended | 6 Months Ended | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
USD ($)
|
Dec. 31, 2010
USD ($)
|
Jun. 30, 2010
USD ($)
|
Jun. 30, 2011
Revolving loans
U.S.
Senior Secured Credit Facility
USD ($)
|
Jun. 30, 2011
Revolving loans
Canadian
Senior Secured Credit Facility
CAD
|
Jun. 30, 2011
Revolving loans
Senior Secured Credit Facility
USD ($)
|
Jun. 30, 2011
Term loans
U.S.
Senior Secured Credit Facility
USD ($)
|
Jun. 30, 2011
Term loans
Canadian
Senior Secured Credit Facility
CAD
|
Jun. 30, 2011
Term loans
Euro
Senior Secured Credit Facility
EUR (€)
|
Jun. 30, 2011
Term loans
Senior Secured Credit Facility
|
Jun. 30, 2011
Revolving and term loans
Senior Secured Credit Facility
LIBOR
|
Jun. 30, 2011
Revolving and term loans
Senior Secured Credit Facility
Base Rate
|
Jun. 30, 2011
Senior Secured Credit Facility
USD ($)
|
Jun. 30, 2011
Senior Secured Credit Facility
Maximum
USD ($)
|
Jun. 30, 2011
Senior Secured Credit Facility
Minimum
|
Jun. 30, 2011
Bank debt
Revolving loans
U.S.
USD ($)
|
Jun. 30, 2011
Bank debt
Revolving loans
Euro
USD ($)
|
Jun. 30, 2011
Bank debt
Revolving loans
Euro
EUR (€)
|
Jun. 30, 2011
Bank debt
Revolving and term loans
Other foreign
USD ($)
|
Jun. 30, 2011
Bank debt
Revolving loans
USD ($)
|
Jun. 30, 2011
Revolving and term loans
|
|
Line of Credit Facility [Line Items] | |||||||||||||||||||||
Date of refinancing, senior secured credit facility | Jul. 28, 2011 | ||||||||||||||||||||
Credit agreement | $ 790,000,000 | 10,000,000 | $ 520,000,000 | 81,000,000 | € 335,000,000 | $ 1,900,000,000 | |||||||||||||||
Additional Borrowing Capacity | 750,000,000 | ||||||||||||||||||||
Long-term debt maturity date | Jul. 28, 2016 | Jul. 28, 2017 | |||||||||||||||||||
Description of maturity date of line credit agreement | The final maturity date for the Revolving Loans and Term Loans will be July 7, 2016 if our 7¼ % Senior Notes have not been refinanced in full on or before July 7, 2016. | ||||||||||||||||||||
Final maturity date for the revolving and term loans if the 7 1/4 Senior Notes have not been refinanced in full on or before July 7, 2016 | 2016-07-07 | ||||||||||||||||||||
Percentage of excess cash flow required for payment | 50.00% | ||||||||||||||||||||
Line of Credit Facility, Interest Rate Description | Under the Credit Agreement, the interest rate for U.S. term loans will be either LIBOR or the base rate under the Credit Agreement plus a margin, the interest rate for Euro term loans will be the Euribor rate under the Credit Agreement plus a margin and the interest rate for Canadian term loans will be either the Bankers’ Acceptance discount rate or the Canadian prime rate under the Credit Agreement plus a margin. Initially, for Term Loans and Revolving Loans maintained as LIBOR, Euribor or Bankers’ Acceptance loans the margin will be 1.75 percent, and for Term Loans and Revolving Loans maintained as base rate or Canadian prime rate loans the margin will be 0.75 percent. | ||||||||||||||||||||
Commitment fee percentage per annum | 0.375% | ||||||||||||||||||||
Letters Of Credit Facing Fee | 500 | ||||||||||||||||||||
Letters Of Credit Facing Fee Percentage | 0.25% | ||||||||||||||||||||
Line of Credit Facility, margin | 1.75% | 0.75% | |||||||||||||||||||
Commitment fee percentage per annum on the daily average unused portion of commitments | 0.375% | 0.25% | |||||||||||||||||||
Letter of Credit Facility, Maximum Borrowing Amount | 200,000,000 | ||||||||||||||||||||
Expected pre-tax charge for loss on early extinguishment of debt | (1,000,000) | ||||||||||||||||||||
Long-term debt, current | 146,602,000 | 13,949,000 | 88,372,000 | 105,900,000 | 40,700,000 | ||||||||||||||||
Long term debt | $ 1,345,827,000 | $ 890,725,000 | $ 760,465,000 | $ 120,000,000 | $ 302,100,000 | € 210,000,000 | $ 422,100,000 |
Inventories (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Inventories | Inventories
consisted of the following:
|
Treasury Stock
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Treasury Stock |
Note 11. Treasury Stock
During
the first six months of 2011, we issued 349,071 treasury shares
which had an average cost of $6.63 per share for restricted stock
units that vested during the period. In accordance with
the Silgan Holdings Inc. 2004 Stock Incentive Plan, we repurchased
132,310 shares of our common stock at an average cost of $36.42 to
satisfy minimum employee withholding tax requirements resulting
from certain restricted stock units becoming vested. We
account for the treasury shares using the first-in, first-out
(FIFO) cost method. As of June 30, 2011, 17,209,721
shares were held in treasury.
|
Acquisitions
|
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Jun. 30, 2011
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Acquisitions |
Note 2. Acquisitions
Graham Packaging
In
June 2011, Graham Packaging Company Inc., or Graham Packaging,
terminated our definitive merger agreement and paid us a
termination fee of $39.5 million in accordance with the terms of
such merger agreement. The proceeds from the termination
fee and costs associated with corporate development activities have
been recorded in selling, general and administrative expenses in
the Condensed Consolidated Statement of Income for the three and
six months ended June 30, 2011.
Vogel & Noot
On
March 1, 2011, we acquired the metal container operations of Vogel
& Noot Holding AG, or VN, which is headquartered in Vienna,
Austria. VN manufactures metal food and general line
containers, currently operates 12 metal container manufacturing
facilities throughout Central and Eastern Europe and is scheduled
to open several new facilities in other developing Eastern
countries in the near term. We acquired these operations
for a total purchase price of €212.4 million ($292.7 million
translated at the U.S. dollar exchange rate at the date of
acquisition), net of cash acquired. A portion of the
purchase price, with an acquisition date fair value of €35.6
million ($49.0 million translated at the U.S. dollar exchange rate
at the date of acquisition), is payable in March
2012. We funded the purchase price for this acquisition
from Euro denominated revolving loan borrowings under our previous
senior secured credit facility.
The
VN acquisition represents a strategically important acquisition for
us as it provides an opportunity to expand our metal container
franchise as we partner with our global customers to support their
growth in the Central and developing Eastern European
markets. VN, which employs approximately 1,600
employees, had annual net sales of approximately $310 million for
the year ended December 31, 2010. The acquired VN
operations have been combined with our pre-existing U.S. metal food
container operations to form our metal containers business segment
(see Note 13).
The
initial purchase price has been allocated to assets acquired and
liabilities assumed based on estimated fair values at the date of
acquisition using valuation techniques including the income, cost
and market approaches. The purchase price allocation is
preliminary and subject to change pending a final determination of
the purchase price and a final valuation of the assets and
liabilities, including property, plant and equipment and intangible
assets, and the related tax impact of any adjustments to such
valuations. Based on revised estimates of fair value of
certain assets and liabilities from our preliminary purchase price
allocation presented in our Quarterly Report on Form 10-Q for the
period ended March 31, 2011, we increased goodwill by $3.3
million.
The
allocated fair value of assets acquired and liabilities assumed are
summarized as follows (in thousands):
Goodwill
of $54.9 million consists largely of our increased capacity to
serve our global customers and achieve operational synergies and
has been assigned to our metal containers segment. None
of the goodwill is expected to be deductible for tax
purposes. Other intangible assets consist of customer
relationships of $19.3 million with an estimated remaining life of
20 years, and a trade name of $3.4 million with an estimated
remaining life of 10 years. Acquired property, plant and
equipment are being depreciated on a straight-line basis with
estimated remaining lives up to 35 years.
The
consolidated results of operations for the six months ended June
30, 2011 included the results for VN since the acquisition
date. Net sales from the VN operations of $75.4 million
and $100.4 million were included in our Condensed Consolidated
Statement of Income for the three and six months ended June 30,
2011, respectively. VN’s results of operations
since the acquisition date, which were not significant, included
the pre-tax negative impact of $5.5 million from the inventory
write-up for VN as a result of purchase accounting in connection
with the acquisition.
Pro Forma Information
The
following unaudited pro forma financial information includes our
historical results of operations for the three and six months ended
June 30, 2011 and 2010 and gives pro forma effect to the VN
acquisition as if it had been completed as of January 1,
2010. The pro forma results of operations include
interest expense related to incremental borrowings used to finance
the VN acquisition and adjustments to depreciation and amortization
expense for the valuation of property, plant and equipment and
intangible assets. In addition, net income for the six
months ended June 30, 2010 includes the impact of the initial
inventory write-up and acquisition costs. The pro forma
results of operations do not give effect to potential synergies or
additional costs resulting from the integration of VN with our
existing operations.
The
unaudited pro forma financial information is not intended to
represent or be indicative of our consolidated results of
operations or financial condition that would have been reported had
the VN acquisition been completed as of the beginning of the
periods presented, nor should it be taken as indicative of our
future consolidated results of operations or financial
condition.
Unaudited
pro forma financial information:
DGS
On
March 1, 2011, we acquired the twist-off metal closure business of
DGS S.A. in Poland, or DGS. The purchase price of $20.7
million, net of cash acquired, was primarily funded with foreign
bank revolving loan borrowings. We applied the
acquisition method of accounting and recognized assets acquired and
liabilities assumed at fair value as of the acquisition
date. We recognized goodwill of $8.1 million and a
customer relationship intangible asset of $2.9
million. DGS’s results of operations were included
in our closures business since the acquisition date and were not
significant since such date.
|
Amounts Included in Accumulated Other Comprehensive (Loss) Income (Detail) (USD $)
In Thousands |
Jun. 30, 2011
|
Dec. 31, 2010
|
Jun. 30, 2010
|
---|---|---|---|
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Foreign currency translation | $ 31,422 | $ 17,276 | $ 4,758 |
Change in fair value of derivatives | (5,212) | (6,695) | (8,033) |
Unrecognized net periodic pension and other postretirement benefit costs: | |||
Net prior service credit | 6,238 | 6,391 | 6,647 |
Net actuarial loss | (77,366) | (79,998) | (73,959) |
Accumulated other comprehensive loss | $ (44,918) | $ (63,026) | $ (70,587) |
Retirement Benefits
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Retirement Benefits |
Note 8. Retirement Benefits
The
components of the net periodic pension benefit costs are as
follows:
The
components of the net periodic other postretirement benefits costs
are as follows:
As
previously disclosed in our consolidated financial statements and
notes thereto included in our Annual Report on Form 10-K for the
year ended December 31, 2010, there are no significant minimum
required contributions to our pension plans in 2011.
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Business Segment Information
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Business Segment Information |
Note 13. Business Segment Information
Reportable
business segment information for the three and six months ended
June 30 is as follows:
Total
segment income from operations is reconciled to income before
income taxes as follows:
Sales
and income from operations of our metal container business are
dependent, in part, upon the vegetable and fruit harvests in the
midwest and western regions of the United States and, to a lesser
degree, various geographies in Central and Eastern
Europe. Our closures business is also dependent, in
part, upon vegetable and fruit 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 income from operations during that
quarter.
|
Income Taxes
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Income Taxes |
Note 9. 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. The Internal Revenue Service, or IRS, has
commenced an examination of Silgan’s income tax return for
the periods ended December 31, 2004 through December 31,
2007. It is reasonably possible that this IRS audit and
IRS audits for prior periods will be concluded within the next
twelve months, and that the conclusion of these audits may result
in a significant change to our reported unrecognized tax
benefits. Due to the ongoing nature of these audits, we
are unable to estimate the amount of this potential
impact.
|
Acquistions - Unaudited Pro Forma Financial Information (Detail) (Vogel & Noot Holding AG, USD $)
In Thousands, except Per Share data |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Vogel & Noot Holding AG
|
||||
Business Acquisition [Line Items] | ||||
Net sales | $ 822,224 | $ 761,859 | $ 1,570,831 | $ 1,494,239 |
Net income | $ 53,589 | $ 39,507 | $ 81,625 | $ 63,571 |
Earnings per share: | ||||
Basic net income per share | $ 0.76 | $ 0.52 | $ 1.17 | $ 0.83 |
Diluted net income per share | $ 0.76 | $ 0.51 | $ 1.16 | $ 0.82 |
Financial Instruments
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
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Financial Instruments |
Note 7. 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 June 30,
2011:
Fair Value Measurements
Financial Instruments Measured at Fair Value
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.
The
financial assets and liabilities that are measured on a recurring
basis at June 30, 2011 consist of our cash and cash equivalents,
interest rate swap agreements and natural gas swap
agreements. We measured the fair value of cash and cash
equivalents using Level 1 inputs. We measured the fair
value of the swap agreements using the income
approach. The fair value of these agreements reflects
the estimated amounts that we would pay based on the present value
of the expected cash flows derived from market interest rates and
prices. As such, these derivative instruments are
classified within Level 2.
Financial Instruments Not Measured at Fair Value
Our
bank debt and 7¼% Senior Notes are recorded at historical
amounts in our Condensed Consolidated Balance Sheets as we have not
elected to record them at fair value. The carrying
amounts of our variable rate bank debt approximate their fair
values. Fair values of our 7¼% Senior Notes are
estimated based on quoted market prices.
Derivative Instruments and Hedging Activities
Our
derivative financial instruments are 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.
We
utilize certain derivative financial instruments to manage a
portion of our interest rate and natural gas cost
exposures. We 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) income. We generally do not utilize
external derivative financial instruments to manage our foreign
currency exchange rate risk.
Our
interest rate and natural gas swap agreements are accounted for as
cash flow hedges. During the first six months of 2011,
our hedges were fully effective. The
fair value of our outstanding swap agreements in effect at June 30,
2011 was recorded in our Condensed Consolidated Balance Sheet as a
liability of $9.2 million, of which $3.8 million was included in
accrued liabilities and $5.4 million was included in other
liabilities.
The
amount reclassified to earnings from the change in fair value of
derivatives component of accumulated other comprehensive (loss)
income for the six months ended June 30, 2011 was a loss of $1.6
million, net of income taxes. We estimate that we will
reclassify losses of $2.0 million, net of income taxes, from the
change in fair value of derivatives component of accumulated other
comprehensive (loss) income to earnings during the next twelve
months. The actual amount that will be reclassified to
earnings will vary from this amount as a result of changes in
market conditions.
Interest Rate Swap Agreements
We
have entered into Euro interest rate swap agreements to manage a
portion of our exposure to interest rate
fluctuations. At June 30, 2011, the aggregate notional
principal amount of our outstanding interest rate swap agreements
was €125.0 million. The difference between amounts
to be paid or received on our interest rate swap agreements is
recorded in interest and other debt expense in our Condensed
Consolidated Statements of Income. For the six months
ended June 30, 2011, net payments under our interest rate swap
agreements were $2.6 million. These agreements are with
a financial institution which is expected to fully perform under
the terms thereof.
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. At June 30, 2011,
the aggregate notional principal amount of our natural gas swap
agreements was 479,000 MMBtu of natural gas with fixed prices
ranging from $4.198 to $4.985 per MMBtu, which hedges approximately
15 percent of our estimated twelve month 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. For the six months ended June 30, 2011, net
payments under our natural gas swap agreements were $0.2
million. These agreements are with a financial
institution which is expected to fully perform under the terms
thereof.
Foreign Currency Exchange Rate Risk
In
an effort to minimize foreign currency exchange rate risk, we have
financed acquisitions of foreign operations primarily with term and
revolving loans 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 Euro
denominated borrowings totaling €320.0 million as net
investment hedges. Foreign currency losses related to
our net investment hedges included in accumulated other
comprehensive (loss) income for the six months ended June 30, 2011
were $30.6 million, net of a deferred tax benefit of $12.8
million.
|
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