Silgan Holdings Inc (SLGN) 2007 Q2 法說會逐字稿

Good day, everyone and thank you for joining the Silgan Holdings second-quarter 2007 earnings conference call. Today's call is being recorded. From the Company today, we have Tony Allott, President and Chief Executive Officer and Bob Lewis, Executive Vice President and Chief Financial Officer and Malcolm Miller, Vice President and Treasurer. At this time, I would like to turn the conference over to Mr. Miller. Please go ahead, sir.

Thank you. Before we begin the call today, we would like to make it clear that certain statements made today on this conference call may be forward-looking statements. These forward-looking statements are made based upon management's expectations and beliefs concerning future events impacting the Company and therefore involve a number of uncertainties and risks, including, but not limited to, those described in the Company's annual report on Form 10-K for 2006 and other filings with the Securities and Exchange Commission. Therefore, the actual results of operations or financial condition of the Company could differ materially from those expressed or implied in the forward-looking statements. With that, let me turn it over to Tony.

Thank you, Malcolm. Good morning, everyone and welcome to Silgan Holdings second-quarter conference call. As usual, our plan today is for me to make a few brief comments about the quarter and then for Bob Lewis to go through in a little more detail the quarter and the outlook for the year. Afterwards, we will be happy to take any questions you may have.

Let me start by saying that we believe that we set a pretty high hurdle for ourselves in the second quarter and are pleased to say that we achieved it. As a result, we remain comfortable about the full year and reconfirm this outlook as we head into the largest quarter of our year.

We earned adjusted net income of $0.74 per diluted share for the second quarter, which represents a 40% increase over the $0.53 per share adjusted net income reported in the second quarter of 2006. Each of our businesses recorded growth in volume and income from operations during the quarter as compared to the prior year.

In addition, we successfully concluded the previously discussed union negotiations and began reducing the provisional inventory earlier than we had expected. While this had a slight negative impact on the quarter, keep in mind that our plan was to work this inventory off during the back half of 2007, so really it represents a slight shift of timing during the year.

The closures business had another good quarter as the international operations continued to perform well and our domestic business was in line with our expectations. Our metal fluid container business delivered strong gains versus the prior year. Our plastics business had very strong volumes for the quarter, particularly in the personal care product area and delivered earnings improvement over the second quarter of 2006.

However, as we said in the press release, we were somewhat disappointed by the mix of products sold in the plastics business as a result of the comparative year-over-year decline in demand levels in the plastic fluid productline due to less promotional activity.

With that said, with two quarters behind us and very strong earnings performance, we continue to be very positive about the prospects for each of our businesses. Additionally, we anticipate strong cash flow generation and continue to look for potential acquisitions to continue strengthening our strategic positions. I will now turn it over to Bob to talk in a little more detail about the financials and the outlook.

Thank you, Tony. Good morning, everyone. As you've seen, our results for the quarter outpaced the prior year by some 40% and were slightly above the high end of our range after giving effect to the earlier than expected reduction in provisional inventory.

Highlights of the quarter include increased volumes in each business, accretion from the recently acquired businesses and the successful completion of the previously discussed union negotiations. As a result, we delivered record earnings for the second quarter.

On a consolidated basis, net sales for the quarter were $683.6 million, up $86.4 million or 14.5% due to the inclusion of the international closures business for the full quarter, as well as Cousins-Currie, each acquired in 2006. Additionally, our net sales benefited from increased unit volume in each business and from the contractual pass-through of higher raw material costs and inflation and other manufacturing costs, particularly in our metal food container and closure businesses.

Net income for the quarter was $26.8 million or $0.70 per diluted share compared to net income of $16.4 million or $0.43 per diluted share in the prior year quarter. Based on our view of providing better comparisons and that is included in tables four and five of the press release, adjusted net income per diluted share was $0.74 in the second quarter versus $0.53 in the prior year quarter, which excludes the impact of rationalization charges incurred in both periods.

Rationalization charges of $2.3 million recorded during the second quarter of 2007 are primarily related to the ongoing costs associated with the St. Paul, Minnesota and Stockton, California rationalization plans initiated during 2006. We recorded rationalization charges of $6.2 million in the second quarter of 2006 related to these rationalization initiatives, as well as the closing of the Valencia, California plastics facility.

Interest expense increased $2.7 million during the second quarter of '07 versus the same quarter a year ago as we had higher outstanding borrowings directly related to the '06 acquisition activity. Interest expense was also negatively impacted by the effects of higher market interest rates and higher working capital levels.

The tax rate of 35.6% for the quarter benefited from the resolution of certain state tax audits resulting in a net benefit being recorded during the second quarter.

Our second-quarter debt balance increased versus the prior year quarter as we used our revolving credit facility to fund seasonal working capital requirements. As a result, we closed the second quarter of 2007 with outstanding debt on the balance sheet of $1.204 billion compared to $1.171 billion in June of '06. The increase versus the second quarter of '06 is a result of acquisition borrowings and the borrowings associated with the provisional inventory built year over year offset by cash flow used to pay down debt at year-end.

Our fixed-rate debt ratio at the end of the second quarter was 58% versus 54% in the same quarter last year. This increase is a result of the swaps associated with the euro debt used to fund the international closures operations and term debt put in place for the Cousins-Currie acquisition. Our current fixed debt ratio is consistent with our historical percentage and in line with our policy.

For those looking at cash liquidity metrics, depreciation and amortization for the second quarter of '07 was $33.9 million versus $31.8 million for '06, the primary drivers of the impact of the 2006 acquisitions in capital spending. On a full-year basis, we expect depreciation and amortization in 2007 to be slightly higher than the previous year as depreciation associated with capital spending and the '06 acquisition activity is partially offset by the depreciation fall-off from previous acquisitions.

First-quarter capital expenditures totaled $37.9 million compared with $32.1 million in the same quarter last year. We continue to see opportunities to invest in our business and now see capital expenditures for 2007 to be something like $150 million. Additionally, we paid a quarterly cash dividend of $0.16 per share in June. The total cash cost of the dividend was $6.1 million.

Highlights of our individual business (technical difficulty) as follows. Second-quarter net sales in the metal food container business were $365 million, an increase of $15 million versus the same period in 2006. The quarter benefited from higher volumes and the higher average selling prices due to the pass-through of higher raw material costs and inflation and other manufacturing costs.

Income from operations in the metal food container business increased $8.8 million to $27.7 million for the quarter. This increase was attributable to a $3.7 million reduction in rationalization charges in the second quarter of 2007 versus the same period last year increased sales volume, the year-over-year benefit of the lag contractual pass-through to customers of significant inflation and other manufacturing costs experienced during 2006 and benefits derived from ongoing cost saving initiatives.

These factors were partly offset by the negative impact of an earlier than anticipated reduction in provisional inventory as certain union negotiations were successfully completed.

Net sales in the plastic container business increased $12.2 million to $157.2 million for the second quarter of 2007 primarily as a result of the inclusion of Cousins-Currie and increased volumes. These benefits were partially offset by lower demand levels for our food productline, principally due to less customer promotional activity versus the prior year period.

Income from operations increased in the second quarter of 2007 by $600,000 to $12.4 million versus the same period a year ago. The primary contributors to this increase were the inclusion of the Cousins-Currie business and increased volumes offset by less favorable mix due to lower demand levels for our plastic food productline.

Net sales of the closures business increased $59.2 million to $161.4 million in the second quarter of '07. This increase was primarily attributable to the acquisition of the international closure businesses completed during 2006. Volumes in both the domestic and international closure business increased versus the prior year. The increase in income from operations in the closures business of $10.1 million to $20.8 million for the second quarter of 2007 was primarily a result of the international acquisition.

As we head into the largest quarter for our business, we reconfirmed our full-year earnings estimates of adjusted net income per diluted share in the range of $3.15 to $3.25. We are also providing estimates of adjusted net income per diluted share for the third quarter 2007 in the range of $1.15 to $1.25 per share. This compares favorably to adjusted net income per diluted share of $1.19 for the prior year third quarter after giving effect to the impact of reducing provisional inventory.

The primary drivers behind this increase include a more normalized tax season, including an assumed shift of more tomato volumes back into the third quarter and better year-over-year volumes in the metal food container and plastic container businesses.

Keep in mind the year-over-year negative comparisons of overhead costs from the inventory reduction will be nearly $0.20 per diluted share in the second half of the year. Also, as we have discussed in prior years, given the magnitude of the third quarter and the potential impact of movements in harvest dates, the results of the back half of the year can shift between the quarters. This is perhaps further complicated by the timing of the work-off of provisional inventory.

As I commented earlier, capital spending for 2007 is likely to be more in line with $150 million as we continue to find investment opportunities in our existing businesses. However, even after increasing our capital investments, we continue to estimate we will generate approximately $150 million of cash that will be available for acquisitions, further debt reductions or other permitted purposes, including dividends, share repurchases or additional capital expenditures.

That concludes our prepared comments, so we can now open it up for questions and answers. Darrell, would you please provide the directions for the Q&A session?

(OPERATOR INSTRUCTIONS). Ghansham Panjabi, Wachovia Securities.

Hey, guys. Good morning.

Good morning, Ghansham.

How much do you estimate the earlier than expected inventory draw-down affected margins in metal food relative to maybe your guidance going into the quarter?

Well, the -- it is just about 50 bps. It was just under $2 million.

And the union renegotiation, does that add a lot to your cost base going forward?

No, it does not. Essentially the focus on that without getting into a lot of detail -- the focus on that was more about post-retirement costs. We, as most companies, are very focused on remaining competitive and our view is that kind of the world around us is getting some control around post-retirement costs. So that was our main focus and obviously we are relatively pleased how that came out.

Okay. And just to clarify on the free cash flow, it looks like you are raising CapEx by $20 million, but you are keeping the free cash flow outlook the same. What is driving the increase operating cash flow?

Well, I think what we said before is that we were probably averaging -- we thought the range was going to be somewhere between 130 and 140 on the CapEx side and we are now thinking it is going to be up closer to 150, so I wouldn't say it is a $20 million increase.

But the free cash flow is being raised a little bit, right?

Yes and I guess some of that or a lot of that will come from our ability to squeeze more out of the working capital.

Okay, great. Thanks so much. Good luck in the quarter.

Thanks.

Chris Manuel, KeyBanc Capital Markets.

Good morning, gentlemen.

Good morning, Chris.

A quick question for you on the plastic side of the business. Can we delve a little deeper into what is happening on the food side? Is it more of a competitive landscape issue? Is it more of a temporary issue or what is happening there? And then can you refresh us with what percent of your plastics revenue come from food?

Sure. First, let me just say food is one of our -- it's not our major one, as you know. Personal care is major. So it is a relatively smaller part of that business. The range of products we have and the reason I am not giving you exact answers is because what we are talking about here is a specific set of that range. So the major products we sell that are broadly classified as food could go from spice bottles to sifters around that to salad dressing and BBQ bottles.

What we are really referring to here though is this last set, which is containers that are for and typically they are singlewall or multi-wall containers either for dry food products or for microwavable bowl situations -- soup, chili, etc. So that is the group we are really talking about. So again even a smaller subset.

And essentially just what is happening there -- it appears you have got a couple of customers who were doing promotional activity a year ago and just from a timing perspective seem to be doing less of that. So it is not our opinion at this point that there is any kind of anything fundamental change going on here or a competitive landscape. Our view on it right now is just kind of the timing of when I think customers are promoting and inventory builds that go on around all of that.

And then, Tony, would your shipments -- I know it is early through this quarter -- but would your order patterns and shipments thus far into the third quarter suggest that that is back on track?

No, not yet. I would say it is -- right now, kind of looks the same. We are obviously not very far into the quarter, but right now I don't see any change in that.

Okay. And can you give us some volume numbers without the acquisitions? So metal food up what percent? Plastics up what percent ex-acquisition, etc.?

Two parts to that. One, let me just say that as we have said in the past, our view of volume data is that it is very difficult to talk about. Use plastics -- actually this quarter is a perfect example where volume was very strong, but you get kind of a funny mix impact and in plastics, we range from crazy glue bottles all the way up to 30 liter containers, etc. So the swing is really significant, which is why we tend not to talk in a lot of detail around volume.

With that said, let me try to put words around it for you. In the metal food container side, we did see volume growth there in kind of a couple percentage point range, so modest what you would expect in that business.

On the closures side, we saw again modest growth domestically and stronger growth internationally on the closures and essentially my view of that is that that is just the European economy seems pretty robust right now. So that'd be kind of mid, even a little higher than mid single digits on that side.

Plastics was pretty strong. I will call it mid single digits, but if you adjust out the Cousins-Currie acquisition, the food piece we just talked about and the Valencia close, it's actually a little bit even higher than that. So you are getting kind of mid and upper single digits. So again, as we said, volumes across the business look pretty good to us.

Okay. Can you tell us what the revenue contribution was for Cousins-Currie in the quarter?

Yes, hang on for a second. Bob, --

I will ask you one other question while you're looking that up and the last question I have is with the increasing capital spending, can you give us some sort of a (inaudible) potentially what it is you're spending on? Is it more QuickTop capacity is one of the things I know you have been doing, maybe a little more clarity there?

Sure. The capital spending is -- it's pretty much across the businesses. Again in plastics, we have been saying for a while and again you are seeing it in the underlying volumes here, we continue to see growth opportunities, so we are making investment for new business. We're also making investment on renewal of some business on the plastic side. So again, we continue to see -- if I look at kind of the opportunity -- bid list opportunity in plastics, continues to grow nicely. So that is part of what we are doing.

Equally on the closures side, we continue to see -- domestically I am referring to right now -- growth on plastic closures. So we are continuing to look to capacity expansion on that side. And then in the can business, it is not more QuickTop I think if you alluded to that. It is essentially really there. There has not been much moved in fact and the spend as we have talked about before is more around rationalization efforts, some productivity and then finishing the easy-open end, but that is not new.

Okay. And if you have the revenue number for Cousins-Currie, that will be it.

I do. It's right about $13 million for the quarter.

Thank you, Bob.

George Staphos, Banc of America Securities.

Thanks. Hi, guys. Good morning. I just wanted to dig back into the free cash flow CapEx question. What I remember and obviously correct me if I am wrong. Your prior guidance of $150 million of free cash flow included the spending on dividends. So effectively if we excluded the dividends, it was somewhat a higher number. But if I heard Bob correctly now, the $150 million is available for dividends. So if I have correctly framed it, has your free cash flow guidance in fact stayed the same or has it dropped with the CapEx reduction?

No, actually you are right on both fronts. The $150 million prior guidance was including dividends. So if in fact if you added that back, your free cash flow would have been a little bit higher and it is still the same comparison now. Really my point to available for other things would be things like dividend increases or special other types of dividends. But again as we have said in the past, our continued preferred use of that free cash flow is really around finding acquisitions and/or other opportunities to invest in the business.

Okay. So just to confirm, your free cash flow however you would define it in total has not changed. What you were saying is you might use some of it for an increase in the dividend, but, oh by the way, that is not as likely a use as other uses?

Yes. Yes, it sounds like we are kind of dancing this topic. We are not trying to at all. What we like talking about is cash available for debt reduction, so we don't get caught in a non-GAAP measure of what is free cash flow and so that is a pure number. It is after dividends and everything else. So we are saying that number remains at $150 million even though there is more CapEx being spent. Bob's only point is if we happen to choose the increased dividends then that would then be an offset, but the base dividend would not be an offset to that number.

Right.

So essentially it is an increase in our view of the working capital -- excuse me -- an increase in our view of the cash flow to cover the capital increases.

Okay, fine. I don't mean to dance, guys. It was just that --

No, --

you changed the definition, so --

It's not like we were doing that. That was the only thing I was trying to make clear.

Okay. Secondly, if we look at the guidance and a few pennies on the Silgan P&L in any one quarter is a little bit of rounding error, but nonetheless if you had a little bit more of that fixed cost burden run into the 2Q from the second half for timing reasons and I would imagine that is relatively positive versus where your prior expectations had been for the second half and meantime you beat the second-quarter guidance as you had previously established, doesn't that suggest that your guidance for the whole year, which you have not changed, is in fact perhaps a bit more achievable and what are the offsets to that? Obviously you have the vagaries of the pack, maybe the food plastics issue is a concern but help me -- help us think about what we've just laid out.

I think, George, you are actually thinking about it pretty clearly. That is right. He is talking about a few pennies. I like the way you got into that, but yes, it is true that we essentially got a little bit of the inventory reduction started in Q2. That in theory would be a little bit less to take in the back half of the year and so you are right that we essentially maybe added just a bit of caution to the back half of the year compared to the previous number or slightly more achievable.

The fact is, as we said, we have now come into our big time of the year and those few pennies move around so quickly that we just looked at it and didn't see any reason to do anything other than stay with our expectations because the quarter essentially has performed as we expected so why would we necessarily be in a different posture about the year.

I understand. I understand. When we look at what the impact of the reduced promotional activity is by your food customers in plastics, is that worth $0.85, $0.01, how would you have us -- I doubt it is $0.85. How would you have us think about what it might have been on margin?

Yes, I would tell you it is $2.5 million to $3 million of impact.

Okay. And just earlier, you were answering I think it was Chris' question on CapEx and are we to take the fact that you are increasing CapEx, but it is not going to easy-open end as a reflection that maybe in the last several months, you have become less optimistic on easy-open or are you still equally optimistic and you just feel like you have enough spec capacity coming on for next year that that is appropriate?

Yes to the latter part of that. Recall that what we said is we were adding about 10% capacity with this. So it was -- again, it was speculative, which we have kept hanging out there, but it was also intended to cover us for some period of time in any case. So I would say there is no change at all to our thinking, which had been essentially a long-term perspective on this that we feel very comfortable that easy-open end over time will become the dominant part of the food can industry. We have said we just don't know when that will happen and there is no change to that. Our customers who are relevant around the next change I think are mostly just worried about getting fruit and vegetables packed right now. So they are not thinking a lot I don't think about necessarily what next year's pack is going to look like in terms of the package.

You mean they don't care about analysts' forecasts? Thanks very much, guys.

Thanks. See you later, Chris.

Timothy Thein, Citigroup.

Hey, guys. Good afternoon or good morning I guess. Congrats on a great quarter.

Thank you.

Thank you.

A question I had was on the international closures business, just around how that performed relative to your expectations and specifically on the volume side, if you could comment on that.

Yes, again, I will stick to the other answer, which I'm going to give you directionally volume rather than exact number, but it performed quite well against our expectations, particularly on the volume side. So it was up better than mid single digits in kind of volume numbers. And again what I had said in my quick spiel about volumes around the whole Company as best I can tell that has as much as anything to do with just a strong European economy because it looks -- it is pretty broad-based and so we are pleased with that.

But equally we are pleased with the -- what the management team has been able to do in terms of holding some of the cost improvements that they had made really prior to us buying the business and to kind of integrating some of Silgan's culture into the way they go to market, etc. So we're very pleased thus far with the business.

Okay. Does that give you greater confidence that when you look at the potential acquisition candidates out there that with your experience thus far with White Cap that maybe you can look at consolidating some of those smaller players out there in the closures side internationally?

Sure. I mean that was -- we would put that on our list of things we would like to accomplish anyhow, but certainly nothing has happened here that would make us feel less inclined to move in that direction. We think it makes a lot of sense. There are more players in closures in Europe than there are in North America and so we think the opportunity fits there and would be good for the industry, good for customers and we think it would be good for us and our shareholders.

Okay. Good luck in the quarter.

Thank you.

Thank you.

Christopher Butler, Sidoti & Co.

Hi. Good morning, gentlemen.

Morning, Chris.

Just wanted to ask about SG&A expense. I noticed that it is up year over year and I remember this was something we spoke about with the last conference call. You had attributed at least some of it to the business that you were doing in Europe and higher costs associated with that. Just wanted a little bit more color on what we are looking at here and how much of this is more expensive business that you are doing in Europe versus maybe integration costs with some of the acquisitions.

Yes, there are really two things going on there, Chris and you kind of touched on one of them. The international closures business just runs at a higher SG&A margin than the domestic business. That is really relative to the fact that they do business in so many different countries where we need -- we need accountants for statutory filings, we need sales people that speak the local language. So it is just inherently a higher SG&A margin business.

The other thing that is happening in the quarter and I am not sure if this was the crux of your question or not, but if you look at on the corporate line where we are up for the quarter year over year, but if you look at the year to date, we are in line and essentially what happened in the prior year, we just have some timing of some professional service fees that got paid differently in the prior year than they did this year, but on a year-to-date basis, it is in line. So I think the real answer to the question you are asking is more around the higher margin on the international business.

And you had mentioned that looking at some of the crops here and the weather, looking through the harvest here at the end of the summer that tomatoes were looking good. Wondering if you could give us a little bit more detail there.

Sure. I will go around the whole pack because other questions may come up. Starting with tomatoes, right now, everything looks good. What we are hearing from customers seems to be kind of on expectation. You will hear news about California being hot and dry. Thus far, we have heard nothing that really leads us to think that is going to impact the tomato harvest at this point in time.

Staying with the West Coast, the peach side -- again, everything we have been hearing and we are getting pretty far along in that one now, numbers look pretty good on peaches. Again, they are going to be down from two years ago because of [pulp] trees, but in terms of growing season, sounds pretty good right now.

Midwest -- recall that last year was a very strong year in the Midwest, so our expectation was that it was probably going to be down some just because it was such an unusually good year. That would still be our expectation and that is essentially what is in the numbers, but still a good year and that is what we seem to be hearing right now.

It has definitely been hot, generally dry, some areas more dry than others and yet we are kind hearing on the two main ones, corn, everything is still sounds pretty good. They will start packing corn end of July. So that seems to be running about on expectation.

Same with peas. It appears right now that the weather has been fine and there now with peas, they are almost 80% through the pack. So all in all, as you go around it, we still would say Midwest would probably be off from last year. So no real change to our full-year view at this point, but our full-year view was for a pretty good season.

Alright. Thank you very much, guys.

Alton Stump, Longbow Research.

Thank you. Good morning.

Good morning, Alton.

Just to make sure that I didn't mishear this, what was the pretax impact you had mentioned or a ballpark estimates for the inventory reduction?

A little under $2 million if you're talking in the second quarter.

Okay. And then just another question is looking on the cost-saving side, obviously that has been a big piece of your story, particularly here within the US food can segment. Just wanted to get sort of an update there. How much does that play a role in your assumptions for the back half of the year? Obviously don't expect you to give me an actual earnings guidance, but just wanted to maybe get an update of what the outlook is on the cost savings front in the back half.

Well, you are right that that is something that we are always focused on and we do, over a long period of time, we do view that as one of the core competencies, if you will, of how we look to the business.

With that said though, if you look first half to back half, it is not a sizable item. One of the things you will recall we talked about is that if we have two major rationalizations going on -- St. Paul and Stockton plants being shut down. One of the things we had talked about in the first quarter is the fact that we had pulled some of the benefits of that forward.

And so essentially what is happening -- originally when we looked at the year, we thought we would get a lot more of that benefit in the back half, not the first. Now it is kind of happening straight line across the year mostly and so we have already gotten the benefit of that. And a lot of effort is still going in getting those plants out. So as I look at it right now, I'd say kind of on the cost-saving side, there is not a lot of difference back half versus what we see in the first of this year.

Okay, great. Thank you.

Claudia Shank, JPMorgan.

Thanks very much. Good morning.

Good morning, Claudia.

I was hoping you could just comment on the Cousins-Currie acquisition and how it is tracking versus your expectation and maybe sort of now that you have had it for quite some time, where -- sort of have there been any surprises or lessons there and is this large ware segment sort of an area where you would like to continue to grow?

Sure. Cousins-Currie continues to perform very well for us. It was accretive on the quarter. It was essentially not quite as strong in the first quarter, but that was just timing of some of the business that came through. So you straight-line that and it's -- in that specific business that we can identify. So we were very pleased with the business and continue to be.

I think the surprise there really is around the opportunities as we -- we keep obviously a good bullet list of what opportunities sit out there and it is a pretty healthy list. So while you are not seeing it necessarily in the numbers at this point in time, we feel good about the opportunity to expand the large ware business that we have and therefore, we obviously like that segment.

Okay, thanks. And then just finally on the tax rate, is there any guidance we should be using for the rest of the year?

Yes, I think what we have said in the past is that 38% was where we were estimating. It will probably come down a touch from there just related to this last adjustment in the quarter, but I would think that somewhere in the 37% to 38% range is the right way to think about it.

Okay. Thanks very much.

Thanks, Claudia.

Richard Skidmore, Goldman Sachs.

This is [Alex Holshman] on behalf of Richard Skidmore.

Good morning, Alex.

Just had a quick question on what your view was for the organic growth rate and volumes for the European closures business. I know you said it was 5% to 6% this quarter, but it seemed like that was at the high end of your expectations.

Yes, I think again as we talk about that business in the past, it is a metal closure business going on glass packaging. So we -- our expectation in acquiring the business was not for a lot of organic growth, at least as I define organic growth. What we said is there were some opportunities that sat around the business, like if we chose to go into developing markets or if we chose to try to build out the plastic closure business. So those were sort of the growth opportunities that sat there and they take another decision on our part, which we have not made. So you are right that on the base metal closure business, I would say the growth was a little more than we expected in the quarter. I wouldn't want anyone walking away thinking we will see that year after year. I think that again as I said is kind of robust economy and they tend to come and go.

Fair enough. And then just can you remind us what countries or regions of Europe is that business most leveraged to?

Well, it's most levered in Western Europe. The largest plants are in Germany, Poland and plants in Italy and then a smaller plant in Turkey, but really Western Europe is 87% of the business.

Okay. Thank you.

Tim Burns, Cranial Capital.

Good morning, everybody. I am still looking for this cash flow statement in my press release, but I guess I am not going to get it. I often wondered why Silgan never hired like Al Roker or Willard Scott to do all this weather forecasting and plant harvesting, but I guess let's leave it to the amateurs.

You know we don't have many people here, Tim. There's no room for that.

The question I had on the plastics promo kind of shortfall, I mean these are kind of hot food, cold weather products, aren't they?

Some of them. Yes, I tried in my litany to make sure we covered -- there's more to it than just that, but that is part of the business, yes.

Okay. And then you said singlewall dry products and that could be spices, it could be a lot of things.

Yes, not spices.

Okay. So you don't want to talk about that. Okay. And then the other question I had is with regard to food cans, do you ever think that the buyers of food cans would eventually take the track of what we are seeing in the beverage market, i.e., specialty sizes and shapes more than they are doing now? It seems like food cans are more of a recipe item, you know?

Yes. Yes is the answer to your question. I do believe that and I believe that more today than I did a year ago for all the same reasons. I could spend a lot of time in our short time, but again consumers love food cans. The only problem is it looks just like the ones 100 years ago. And so what we find is you put on an easy-open end on a food can, all of a sudden you see a major change in the way people view it. So that is the learning process that we all have been going through. And so yes, I think that you will see specialty food cans as time develops shaped, maybe other kinds of convenience factors as well and I am convinced that consumers are going to react very favorably.

So the -- but potentially long term, the value per can shifts just like we have seen with the new easy-open end technology could increase?

I believe that, yes.

Okay. And then --

It probably will happen like beverage. It probably will have some kind of a specialty. It will take a long time. It will be a product here and a product there. So I don't believe that's going to be next year's storyline.

Okay. And then the other question I had was I heard plastic closures, which I know are an adjunct to your kind of White Cap business, but you said that that part of the business is growing quite rapidly. Is that separate from White Cap's traditional metal lid or is it part of it?

No, it is part -- it is in the closures business as we report that business and it was part of the White Cap US business when we acquired that here. Now it is much bigger today than it was when we acquired it, but that capability was there at the time.

Let's say it was a $20 million business, I mean could it become a $250 million business--ish?

Yes. Bigger than what you said anyhow, but yes.

Well, I mean that was back then.

Okay, yes.

Okay. Well, listen, great quarter and talk to you guys later.

Great. Thanks, Tim.

(OPERATOR INSTRUCTIONS). George Staphos, Banc of America Securities.

Hi, guys. Just one last question on European closures. One of the other suppliers in the market reported their earnings in the last 24 hours. They had their conference call this morning. And our take was they perhaps have seen a bit more competitive activity from some of the fringier players in metal closures in Europe. My guess is from the way you've talked about the business thus far, you have not really seen it and your volumes have actually picked up. But nonetheless, could you comment at all on what you're seeing in terms of competitive activity in that market? Thanks.

Sure. First of all, one of the things that's a little different about Europe is there tend to be -- there are a couple of players that have pretty sizable shares and there tend to in each region to be at least one other player with smaller share that is more regional. And so the kind of history of I think this business and many others is that that always resulted in a certain amount of competitiveness in those markets.

There is no change to that as far as we have seen. So what I would say is depending on what customer and where you are at any point in time, you might feel more or less of that. I don't think we would say our experience has been a heightening of that activity. It is just there. That is part of why the earlier question about consolidation of market I think does make a lot of sense as time goes by.

Okay. Alright, guys. Thanks. Good luck in the quarter.

Thanks, George.

Dan Khoshaba, KSA.

Hi. Good morning, guys.

Good morning, Dan.

It sounds like the acquisition opportunities look pretty good. When you look at those acquisitions, however, do they fit into the typical or traditional acquisition that Silgan makes in that these bolt-on $30 million to $300 million level acquisitions and should we expect kind of the same financial metrics? Should you do something in the next few months?

Yes, first, the point you start with. I think we do -- no change from last quarter or two, but I think we have been saying that we do see -- there are a lot of properties that are coming around now and I think the reason for that is pretty obvious that the sum of the multiple make it pretty attractive to look to sell.

And yes, the acquisitions we like best certainly are the ones that fit into something like you said, $30 million to $300 million bolt-on that either build the franchise we have or expand that franchise is broadly defined. So those are kind of the deals we like and what we are looking for. What was the last part of your question? Was it --

It was about the financial metrics that we've become accustomed to. I mean you typically buy companies in a certain range of EBITDA multiples that are accretive right away. They usually generate lots of cash. I mean is there -- as you look at these properties that look interesting that are out there, do they -- in addition to being bolt-ons, do they fit into the traditional kind of financial metrics that you guys are interested in?

Yes, well, obviously we are still very shareholder-focused, so things like accretion is extremely important to us. So yes, they would. I mean with lower debt costs, multiples logically would go up some, but that is not necessarily the same thing as saying there is no limit to purchase multiples. So we've continued to be very cash-on-cash-focused about the transactions, very disciplined about what kind of synergies we really allow ourselves to think about. They need to be pretty direct and pretty certain. So yes, I would say the discipline we go through and the way we think about is identical.

Okay, great. Thanks.

(OPERATOR INSTRUCTIONS). There are no further questions. I would like to turn it back over to management for any additional or closing remarks.

Great. Thank you, Darrell, for all your help. Thank you, everyone. I appreciate your time on this. We again think it was a very good quarter and are looking forward to finishing out a good, strong year.

Once again, ladies and gentlemen, this will conclude today's conference. We thank you for your participation. You may now disconnect.