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Silgan Announces Second Quarter Earnings And Confirms Full Year 2012 Estimate

Stocks in this article: SLGN

The effective tax rate was 23.9 percent and 34.4 percent for the second quarter of 2012 and 2011, respectively. The second quarter of 2012 included the cumulative adjustment of reductions in the enacted tax rates in certain foreign countries, which had a significant favorable impact on the effective tax rate due to the scale of income before income taxes in the quarter as a result of the sizeable charge for the loss on early extinguishment of debt.

Metal Containers

Net sales of the metal container business were $479.7 million for the second quarter of 2012, a decrease of $2.6 million, or 0.5 percent, as compared to $482.3 million in 2011. This decrease was primarily due to the impact of unfavorable foreign currency translation of approximately $7.5 million and a less favorable mix of products sold, partially offset by higher average selling prices as a result of the pass through of higher raw material costs. Unit volumes increased slightly in the second quarter of 2012 as compared to the same period in 2011 primarily as a result of the Nestlé Purina PetCare steel can operations acquired in September 2011, mostly offset by volume declines due to a slow start to the vegetable pack and softness in the European markets, particularly in general line cans.

Income from operations of the metal container business decreased $2.8 million in the second quarter of 2012 to $40.1 million as compared to $42.9 million in 2011, and operating margin decreased to 8.4 percent from 8.9 percent over the same periods. The decrease in income from operations was primarily the result of a less favorable mix of products sold, increased price pressure and volume declines in European markets due to overall economic weakness and costs of $1.9 million associated with the start-up of three new production facilities in eastern Europe and one new facility in the Middle East, partially offset by charges in the second quarter of 2011 of $3.3 million related to the resolution of a past product liability dispute and $1.4 million related to rationalizations.

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