Silgan Holdings Inc. (Nasdaq:SLGN), a leading supplier of rigid packaging for consumer goods products, today reported second quarter 2017 net income of $27.9 million, or $0.25 per diluted share, as compared to second quarter 2016 net income of $33.3 million, or $0.27 per diluted share.
“We are pleased with our second quarter 2017 results, as we reported adjusted net income per diluted share of $0.35, an increase of 16.7 percent over the prior year period with improvement in each of our businesses,” said Tony Allott, President and CEO. “Our results include the recently acquired Dispensing Systems operations, which is performing well and making good progress towards integration and synergy targets. Our metal and plastic container businesses continue to benefit from lower manufacturing costs and improved efficiencies resulting from our recently completed footprint optimization program. Our closures business benefitted from the inclusion of Dispensing Systems in the quarter, and the legacy operations performed well primarily due to manufacturing cost savings and efficiencies, partially offset by lower unit volumes as compared to record volumes in the prior year quarter,” continued Mr. Allott. “Based upon our performance to date and continued confidence in achieving our proposed synergy targets for the Dispensing Systems operations, we are confirming our full year 2017 earnings estimate of adjusted net income per diluted share in the range of $1.60 to $1.70,” continued Mr. Allott.
Adjusted net income per diluted share was $0.35 for the second quarter of 2017, after adjustments increasing net income per diluted share by $0.10. Adjusted net income per diluted share was $0.30 for the second quarter of 2016, after adjustments increasing net income per diluted share by $0.03. A reconciliation of net income per diluted share to “adjusted net income per diluted share,” a Non-GAAP financial measure used by the Company that adjusts net income per diluted share for certain items, can be found in Tables A and B at the back of this press release. All per share amounts have been adjusted for the two-for-one stock split that occurred on May 26, 2017.
Net sales for the second quarter of 2017 were $1,021.8 million, an increase of $147.2 million, or 16.8 percent, as compared to $874.6 million in 2016. This increase was the result of the acquisition of Dispensing Systems in April 2017 and higher net sales across all of the businesses.
Income from operations for the second quarter of 2017 was $75.2 million, an increase of $7.5 million, or 11.1 percent, as compared to $67.7 million for the second quarter of 2016, while operating margin decreased to 7.4 percent from 7.7 percent for the same periods. The increase in income from operations was the result of the net benefit from the acquisition of Dispensing Systems and higher income from operations in each of the businesses. The decrease in operating margin was due primarily to the negative impact from the purchase accounting write-up of inventory of Dispensing Systems and acquisition related costs in the quarter. Rationalization charges were $3.0 million and $5.0 million in the second quarters of 2017 and 2016, respectively.
Interest and other debt expense before loss on early extinguishment of debt for the second quarter of 2017 was $29.1 million, an increase of $12.2 million as compared to the second quarter of 2016. This increase was primarily due to higher average outstanding borrowings as a result of additional borrowings under the senior secured credit facility for the acquisition of Dispensing Systems in April 2017 and higher weighted average interest rates, including the impact from increasing long-term fixed rate debt through the issuance in February 2017 of the 4 3/4% senior notes due 2025 and the 3 1/4% senior notes due 2025. Loss on early extinguishment of debt of $4.4 million in the second quarter of 2017 was primarily a result of the partial redemption of the 5% senior notes due 2020 in April 2017.
The effective tax rates were 33.0 percent and 34.4 percent for the second quarters of 2017 and 2016, respectively. The effective tax rate in the second quarter of 2017 benefitted from the settlement of a state tax audit.
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