Silgan Holdings Inc. (SLGN) Q2 2015 Earnings Report, Transcript and Summary

Please standby. We're about to begin. Thank you for joining the Silgan Holdings Second Quarter 2015 Earnings Results Conference Call. Today's call is being recorded. At this time, I'd like to turn the call over to Kim Ulmer, Vice President and Controller. Please go ahead. Kimberly I. Ulmer - Vice President & Controller: Thank you. Joining me from the company today, I have Tony Allott, President and CEO; Bob Lewis, EVP and CFO; and Adam Greenlee, EVP and COO. 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 2014 and other filings with the SEC. 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, I'll turn it over to Tony. Anthony J. Allott - President, Chief Executive Officer & Director: Thank you, Kim. Welcome, everyone, to our second quarter 2015 earnings conference call. Our agenda for the morning will focus on the financial performance for the second quarter and then a review of our outlook for 2015. After our prepared remarks, Bob, Adam and I will be pleased to answer any questions. As you saw in the press release, we delivered second quarter adjusted earnings per diluted share of $0.71 right in line with our expectations. This was slightly behind our $0.73 adjusted earnings per diluted share in the comparable quarter of 2014, as each of our businesses were impacted by inefficiencies and incremental costs from their separate footprint optimization programs. Our metal container business delivered 11% volume improvement, as a result of new business associated with the Van Can acquisition, an earlier start to the Midwest vegetable pack and solid volumes in the European business. We're pleased with this growth in the metal container business and are focused on meeting the increased demand requirements from our existing infrastructure this year while at the same time working to better align our geographic footprint and reduce the cost of the recently acquired Van Can supply to more profitably service this business in the future. Our closures business which successfully integrated Portola Packaging last year has shifted the moving production assets to shared facilities. As a result, the business will be better prepared to service national customers with our diverse product lines on a more efficient geographic basis. Progress already made on this effort allowed us to reduce our inventory levels resulting in temporary lower cost absorption during the quarter. Our plastic container business continues to implement a footprint realignment and optimization plan, intended to enhance our competitive position in the long-term and partly mitigate significant price reductions on recent customer contract renewals in the near-term. While the initial timeline of these programs now appears aggressive, progress is being achieved on these efforts. Results in the quarter were further compounded by continued softness in several of our end markets. Based on our year-to-date performance and our outlook for the remainder of the year, we're confirming our full-year estimate of adjusted earnings per share in the range of $3.10 to $3.30. With that, I'll now turn over to Bob to review the financial results in a bit more detail and provide additional explanation around our earnings estimates for 2015. Robert B. Lewis - Executive Vice President & Chief Financial Officer: Thank you, Tony. Good morning, everyone. As Tony highlighted, we delivered quarterly results very much in line with our expectations. As we discussed on previous calls, 2015 is expected to be a transition year across all three of our businesses and there is no doubt we felt the effects of that transition in the second quarter. On a consolidated basis, net sales for the second quarter of 2015 were $914.2 million, a decline of $3.1 million, as decreases in the closure and plastic container businesses due partly to the impact of unfavorable foreign currency were partially offset by increased sales in the metal container business. Net income for the second quarter was $42.2 million, or $0.70 per diluted share, compared to second quarter of 2014 net income of $44 million, or $0.69 per diluted share. Results for 2015 included rationalization charges of $1 million for total increase of adjusted earnings per share of $0.01, while results for 2014 included rationalization charges of $900,000 and a loss in Venezuela of $2.9 million, for a total increase of adjusted earnings per share of $0.04. As a result, we delivered adjusted income per diluted share of $0.71 in 2015 versus $0.73 in 2014. Interest and other debt expense decreased $2.2 million to $16.8 million for the quarter, primarily as a result of lower weighted average borrowing rates, lower average outstanding borrowings and a favorable impact from foreign currency translation. Capital expenditures for the second quarter of 2015 totaled $49.4 million compared with $33 million in the prior year quarter. Year-to-date capital expenditures totaled $98.2 million versus $60 million in the prior year. Additionally, we paid a quarterly dividend of $0.16 per share in June with a total cash cost of $9.8 million and repurchased shares during the quarter for a total purchase price of $7.6 million. Share repurchases on a year-to-date basis were $169.5 million. I'll now provide some specifics regarding each of the financial performances of our businesses. The metal container business recorded net sales of $553.7 million for the second quarter of 2015, an increase of $35 million or 6.7% versus the prior year quarter. This increase is primarily a result of 11% higher unit volumes, partially offset by unfavorable foreign currency of $17.5 million. Volumes were higher year-over-year as a result of incremental U.S. volumes associated with the Van Can acquisition and an earlier start to the Midwest vegetable pack and Europe also had stronger volumes. Income from operations in the metal container business was $48.3 million for the second quarter 2015 versus $50.9 million in the same period a year ago. The decrease in operating income was primarily due to higher manufacturing cost due largely to logistical challenges from changes in customer demand patterns, the inclusion of less efficient Van Can operations and a less favorable mix of products sold, partially offset by the higher volumes. Net sales in the closures business decreased $25.1 million to $207.1 million for the quarter, primarily due to the unfavorable impact of foreign currency of $18.8 million, and the pass-through of lower resin costs, partially offset by a 1% improvement in unit volumes. Income from operations in the closures business for the second quarter of 2015 was $24.6 million, down $0.6 million versus the prior year quarter. This reduction was primarily the result of unfavorable foreign currency translation and a reduction in inventory during the second quarter of 2015, partially offset by the second quarter 2014 operational loss of $2.9 million in Venezuela and higher unit volumes. The second quarter 2015 inventory reduction is a result of returning to a more normal inventory level after building inventory in the second quarter of 2014 to facilitate the Portola integration. Net sales in the plastic container business were $153.4 million for the second quarter of 2015, down $13 million versus the prior year quarter. This decrease was largely due to the pass-through of lower raw material costs, the impact of unfavorable foreign currency translation of $4.4 million, the unfavorable impact from recent longer-term customer contract renewals and a 2% decline in volumes due to weaker demand in certain end markets. Operating income decreased $3.6 million to $9.4 million for the second quarter of 2015. This decrease was primarily related to the unfavorable impact from recent longer-term customer contract renewals, as well as the delayed implementation of certain mitigating cost reduction programs, manufacturing inefficiencies associated with planned equipment moves and new business awards, lower volumes and the impact of unfavorable foreign currency translation. Turning now to our outlook for 2015, based on our year-to-date performance and the outlook for the remainder of the year, we are confirming our estimate of adjusted net income per diluted share in the range of $3.10 to $3.30 per share, which excludes the impact from certain adjustments outlined in Table B of our press release. We're also providing third quarter of 2015 estimate of adjusted earnings in the range of $1.35 to $1.45 per diluted share. As we've discussed in the past, given the magnitude of the third quarter and the potential impact of unforecasted movements in harvest dates, the earnings in the back half of the year can shift meaningfully between Q3 and Q4. Consistent with prior guidance, we continue to forecast free cash flow generation to be approximately $100 million, largely a result of the incremental capital spending across the various footprint optimization programs throughout the businesses, along with the construction of the three new facilities. That concludes our prepared comments. So we can open it up for Q&A and I'll turn it back to Jennifer who can provide directions for the Q&A session.

Yes. We'll go first to Chris Manuel with Wells Fargo.

Good morning, gentlemen. Anthony J. Allott - President, Chief Executive Officer & Director: Good morning, Chris.

Just a couple of questions, let me start with the metal food business, sounds like it did really, really well, pulled some volume ahead. Could you maybe give us a sense, I mean, as you look at the full year or you think about what happened in 2Q in the big picture, is that essentially what happened, some of the volume was more or less pulled ahead that will kind of come at the expense of 3Q and 4Q or do you feel that the situation created earlier crops, better weather, what have you, improved situation somewhat, or how would you think about that? Anthony J. Allott - President, Chief Executive Officer & Director: Hey, Chris, it's Tony. We certainly are expecting to have up volumes for the year. So I would not say everything about the quarter was just about pull ahead. It does appear that we got in the vegetable pack, the Midwest got off to an early start. You'll also recall last year we talked about one customer who was not promoting as hard, so that customer seems to be doing exactly what they said, which is getting back to promotion and filling at a higher rate. So you kind of have those two impacts, which look like pull ahead, but you also have all the business associated with Van Can acquisition that's coming in and will be additive for the year. So the answer is sort of a hybrid. Yes, there is a pull ahead. Yes, there is some chance some of it will come out of Q3; in fact, most surely will. Our estimate for the rest of the year does assume a pretty good pack, so again we are expecting solid numbers from the pack. Everything indicates that way. I'll wait for the follow-up question on that to get in detail on the pack, but I think that rounds out your question.

Yeah, and I mean, so full-year what are you anticipating for volumes? I guess that's inclusive of Van Can, and then if maybe you could give us a little color, too, on Europe? Anthony J. Allott - President, Chief Executive Officer & Director: Sure. I think I said, if you're staying in cans, we are expecting up kind of mid-ish single-digit volumes in the food can business. That does include Europe as well in that number. Europe was strong year-to-date. We continue to see what looks to be a pretty good growing season in Europe. So, our expectation right now is to be comparable or up a bit from what was a very strong pack year last year.

Okay. That's helpful. My follow-up question is, it pertains to the plastics unit. It sounds like maybe you had some plans to some of the relocation stuff that proved to be a bit aggressive. Could you maybe give us a little more color there as to what's changed, what's pushed back? Is it changing any of the opportunity that you think you'll have, how much for extra cost or things associated in the quarter, that kind of stuff? Adam J. Greenlee - Chief Operating Officer & Executive Vice President: Hey, Chris. It's Adam. Looking at our plastics business and the optimization plans that we had in place, the one important thing to remember is that there's not a lot of new capacity going into these optimization plans. So, we are taking our best assets that exist in the network, for the most part, and getting them located in our lowest cost facilities and closer to our customers. So, you are talking about moving existing equipment that has business, that's already booked on it, and is also in the process of commercializing new business awards that we've won as well. So, that being said, really the primary focus of the business right now is servicing those customers, both existing customers and the ones that we've won new business with. And so, versus where that is part of the delay and moving the lines, as we are making sure that we're fulfilling all of our commitments to our customers off of that equipment. So, really, that's the biggest part for the delay is that we've just continued to have challenges and finding the time, if you will, to move those lines. And so you are correct, it's delayed versus where we thought. We still think we're on the right path, we still think we have the right plans as far as the two new operating facilities that are being built, and we'll get to the footprint that we had originally designed.

All right. Is there a way that you can quantify for us, I mean, I see total volumes down 2%, but it sounds like you are winning good chunks of business and I'm sure there is some ebb and flow, some things you kind of let go, some things come in or a natural move, is there a way to kind of give us a sense of how the commercial teams are doing winning new business, is it going along the path you'd hoped, we were kind of looking for over the next year or two some kind of chunk improvements there in volume, but how would you characterize for us the commercialization efforts? Adam J. Greenlee - Chief Operating Officer & Executive Vice President: Sure. What I would say number one again we're experiencing some soft market demand from our organic business. So it is putting a damper on the new business awards as we commercialize them, but I would say that we're having good success. We're implementing the plan from a new business standpoint that we identified early on, activity levels remain very good as far as quoting and actually getting those new business awards. So we're securing business and the timing of that commercialization varies really depending upon the market and the customer, but I would say that we're doing a pretty good job commercially, it's just we haven't been able to offset the softness in the market that we've seen organically.

Okay. Thank you. Anthony J. Allott - President, Chief Executive Officer & Director: Thanks, Chris.

We'll go next to Adam Josephson with KeyBanc Capital Markets.

Thanks. Good morning, Tony, Bob, and Adam. Hope you're doing well. One on the supply chain inefficiencies in the metal container business, Bob can you quantify what the EBIT drag was out of the total year-on-year drag of $2.6 million, I think it was? Robert B. Lewis - Executive Vice President & Chief Financial Officer: Yeah. So I think we're thinking that the inefficiencies across the broader part of the year is going to be somewhere in the $10 million to $15 million range. And so you might expect that we're early into that. We're feeling the effects particularly in one of the lower quarters. So it's kind of right in line, I would call it in the $3 million range.

Got it. Anthony J. Allott - President, Chief Executive Officer & Director: This is Tony, I just want to add one thing, just having kind of looked at the notes out this morning. I think, just to be clear that number Bob just gave you, was a number we gave right out of the box when we started this year. There is really no surprise to us in this. It's not a case of our operations not performing or anything else. Literally it's a footprint challenge that we knew we had coming into the year as customers moved their fill. And so basically it's played out almost exactly as we expected thus far.

Thanks, Tony. I appreciate that. One other one on the U.S. food can business. How would you characterize pricing at the moment? Anthony J. Allott - President, Chief Executive Officer & Director: Again, recall that we're 90% under contract where we went through over the last year to two, we did a lot of new contracts because of the investments we were making around Can Vision 2020. So to us, there is no market movement and price to speak of. But beyond that, I wouldn't say there is anything unusual in the market around that. So I would call it stable passing through our raw material costs as you'd expect and nothing new there.

Thanks, Tony. Just two others, Bob, one just housekeeping question, tax rate and interest for the year? Robert B. Lewis - Executive Vice President & Chief Financial Officer: Sure, the tax rate, as you saw the tax rate is a bit lower in the quarter than the prior year, came in at about 31.3%. So we're expecting the full-year to probably be in the neighborhood of 33%, 33%-plus a little bit. And the primary drivers there around the lower rate are – we had a positive impact of having higher profits in lower tax jurisdictions, which benefited the rate. And then we also had a rate change related to some of the certain international financings, which benefited the rate as well. Embedded in there, there is a small catch-up in the quarter, for that rate change. But as you'll see in the full-year rate, these are recurring tax benefits. So, we're expecting the rate to now be lower on a year-over-year basis.

Thanks. Interest expense? Robert B. Lewis - Executive Vice President & Chief Financial Officer: Sure. On the interest side, I think the primary driver basically is unchanged from where we had talked about in the prior quarters, other than the fact that you had a benefit hit on the interest line for FX and that's really only partially offsetting about a $4 million hit on the EBIT line that sits throughout the rest of the businesses. So the net FX impact is about $0.03, and that's pretty well right in line with what we had talked about in the last quarter, when we adjusted our guidance for the FX impact.

That helps a lot, Bob. Thanks. And just one last one on the tender. Your shares are trading below the low end of the tender range, obviously when the tender happened, the tender priced at the high-end, now they're below the low-end. And I think if I look at the last couple of tenders, the shares went right through the high-end and kept marching up, so this seems to be different than previous instances. Are you at all surprised by what's happened in that regard? Robert B. Lewis - Executive Vice President & Chief Financial Officer: Yeah. I mean look, our business is not to focus on what the stock market reaction is. We kind of looked at this as just exactly what it was: a return of capital, and it was up to the shareholders to make their own decision as to whether they wanted that return or whether they saw value in the equity. I think we're happy with the way the business is performing and we see long-term value created. So, I'll leave it at that and not pass judgment on where people make their decisions.

Got it. Thanks a lot, Bob. Appreciate it.

We'll go next to George Staphos with Bank of America.

Hi, everyone. Good morning. Thanks for all the details. I want to maybe start off in plastics, Tony, Bob and Adam, you went through a number of qualitative description in terms of what's happening in the market, and why some of these initiatives are maybe being delayed somewhat? I guess to start, I would ask, if you had to index the market right now versus what you would see as normal demand, where would you see it for your end market, is it a 95, if 100 is normal, is it 80, could you help us understand where the market is relative to what you would like to see or normally expect to see? And in turn, is there a way to quantify how that might be having an effect on your delays and any of your cost mitigation efforts or if that's a totally separate subject? Thanks and I'll have a few others. Adam J. Greenlee - Chief Operating Officer & Executive Vice President: Okay. Thanks, George, it's Adam. I guess if we're trying to index the demand in our plastics business, I would say it's probably roughly around a 90 out of a 100. In my opinion, I think what's happened George is, as we rebalance our portfolio and bring in these new business awards, it does create a little bit of complication to our system, and so, we're not as efficient as you are when you're up and running commercial products and you've got cut-ins and start-ups associated with the new businesses. But to quantify that is pretty difficult. But it is a result of lower absorption because the volume is down and we are running less efficiently, because we are qualifying new products. So, as we go forward, the footprint optimization really isn't impacted by that to a large degree, simply because that is a longer term plan that we have that really gets the business back to a competitively advantaged position in the marketplace. So, we do have a short-term issue with our volume, with the delayed implementation of the cost mitigation efforts for the price concessions that we gave. But we do think that we're on the right path and that we will look to be at that run rate as we head into 2016 at this point.

Okay. Two questions, one if I would just on the level of market demand relative to what complications it may or may not be bringing into the operating issue for the plastics business. I would imagine that if demand is substandard in the market, that maybe gives you more flexibility to do the operating work, right, because you have less demand on your existing capacity from your various end markets. So, would that not help your ability, if demand is slower in the market to get these projects done. And then, I may have missed it and I apologize if I did. Where specifically – what are the sources for the delays in the cost mitigation effort initiatives? Adam J. Greenlee - Chief Operating Officer & Executive Vice President: Okay. So, back to market demand, George. I think the important thing to realize there is that we service many different markets and have different customers and plants all over the country. So unfortunately, the target markets that we are focused on are doing fairly well from a demand standpoint. That's also where we're growing and getting new business awards. So you got the kind of complicating factor that your busiest lines, your busiest plants are also experiencing heavy volume of new business awards because they're the markets that we are focused on and that we are attempting to implement our growth strategy on. So that is part of the complication. So it doesn't necessarily benefit us that the market softness in the plastics market in general to qualify additional new business because where we see softness is not necessarily where we're growing.

Understood. Anthony J. Allott - President, Chief Executive Officer & Director: And if you look at the delays in the mitigation, it falls right into it, right, because those are the very same lines that we're looking to move and relocate and optimize and get our best assets and our lowest cost plants closest to our customers, those are the lines that we're running 24/7. And that we are trying to optimize right now. So it's been a complicating factor. But I think when you get into it by customer by market segment, it does add a little clarity.

That's fair. Two quickies on metal and I'll turn it over. Could you provide if possible, what the organic, i.e. excluding Van Can, volumes were for metal on a year-on-year basis in the quarter? And then, when I looked at the revenue percentage changes – I did my own based on what you said for FX, I came up with roughly about a percentage point or so remaining gap to the negative. Was that pass-through of steel? I know you said, I think to Adam's question, there has been no change in pricing. But was there any price erosion that was beyond pass-through or was there another issue there? Thanks, guys. I'll turn it over. Anthony J. Allott - President, Chief Executive Officer & Director: Thanks, George. Yeah, so on the growth, we had 11% growth. The number one contributor to that was the addition of new businesses associated with Van Can acquisition. So that was less than half, but the largest component. The next largest component was the pack business coming in. And then finally, you had Europe being the third in that. So that gives you kind of a bit of a scaling on that. So you did have the organic growth that comes from both Europe and from the pack. Those two in combination are greater than half of that increase.

That's helpful. Thank you, Tony. Anthony J. Allott - President, Chief Executive Officer & Director: Some of that pulled forward. The margin question, I think that the other biggest point on margin is now recall that Van Can and associate business. What we've said is we bought a business that was losing money. That our plan was, and continues to be, to improve the profitability of those plants that we brought on, bring in new assets, new skill sets, et cetera. And that's exactly we intend to do. So one of the biggest pieces of the volume gain is basically add no profit. So that's the rest of kind of your margin answer. Sorry, that plus all of the logistical elements that we talked about. So you got high freight costs, high warehouse costs, you're moving a lot of product around, you're not necessarily making the most efficient location because you can't. That's not where the customer needs it. So you got those two points that are sitting on the margin as well.

But I apologize, I was referring to revenue. So there's a point to the negative on revenue. Was that pass-through of steel if I adjust for currency and what you said volume was? Anthony J. Allott - President, Chief Executive Officer & Director: Yeah. No. All that is, is that the mix of the products of Van Can and associate are much lower price point product. They're not our average. So...

Okay. Anthony J. Allott - President, Chief Executive Officer & Director: That's what we would call a mix point.

Understood. Thank you. Anthony J. Allott - President, Chief Executive Officer & Director: Great. Thanks, George.

We'll go next to Chip Dillon with Vertical Research Partners.

Yes. Thank you very much. And good morning, Tony and Bob. Anthony J. Allott - President, Chief Executive Officer & Director: Hi, Chip.

First question is on some of the overseas operations. I know, I think you have, what, two plants, I think or several in Russia, Ukraine and Jordan and with all the – I know, we haven't heard much about Russia and Ukraine in the last six months. Have things started to maybe improve slowly there or are we still sort of in the same mode as we were back when the tensions were higher? Anthony J. Allott - President, Chief Executive Officer & Director: Sure. I think the answer is shortly it depends upon which market you're talking about. I think as to the Ukraine, it's still a pretty difficult market. I think, as we've talked about in the past that plant was cited to export into Russia, and that's obviously not happening to the degree that we would have wanted it to when we cited the plant there. So there is very little activity that's happening in that plant right now, so that's a little bit of a drag for us. The Russian plants are actually from a volume perspective doing pretty nicely. They saw pretty good pack volumes. They had an early P (28:35) pack there. I think everything that the growers can grow and pack there, they're doing so. So the volumes are pretty good. I think the caution remains and we've been at this for a while now trying to mitigate a lot of the risk here, is around what's going to happen to the economy, what kind of liquidity exists there. So just to remind you, we did index all of our contracts over there into euro to mitigate exposure to the ruble which has been done and the market is still operating that way. We've kind of indexed our customers on a credit worthiness basis, and we're being very prudent about what kind of credit we're extending to customers. Only the very top tier customers are getting extended credit. Others are being serviced, but serviced either cash in advance or cash on delivery. So more of the same and the team that we have on the ground over there is paying close attention. So I would say we're cautiously optimistic, given the volume outlook in Russia, but doing everything we can to mitigate the risk on a go-forward basis.

Okay. And in Jordan, anything remarkable there, good or bad, or is that sort of steady as it goes? Anthony J. Allott - President, Chief Executive Officer & Director: Yeah. Well, steady for that part of the world is all relative, right, but I think we're seeing decent volume there as more and more filling capacity came into Jordan to service the broader Middle East. So that's doing okay. From time to time as the fighting gets closure to the various borders, we may see temporary shutdowns in terms of our freight lanes. And so we experienced some of that, but overall that business seems to be doing very good relative to where it was a year or two ago, which is basically had no volume at that point.

Okay. And then just as a follow-up, I know you mentioned the $10 million to $15 million, I guess, headwind you have this year in the plastics business given all the moving parts. Do you think you'll get pretty much all of that back next year or will it take a while to sort of get everything worked out, and maybe you won't see it all back until 2017, but if you could just clarify that? And then secondly if I think about what you're doing in food can, so I know that's still in progress, if we assume metal prices stayed flat, do you think the unit cost of the whole business would actually decline next year even though you would expect maybe a couple percent inflation with wages and other costs? Anthony J. Allott - President, Chief Executive Officer & Director: Yeah. I think just to clarify the point and probably both now sort of related here, but the $10 million to $15 million headwind that we referenced is in the containers business, not in the plastics business.

Oh, I'm sorry. Anthony J. Allott - President, Chief Executive Officer & Director: So – so, that – we will experience that through the year. I think, the thinking right now is that we'll kind of get – as the plants come up and running, we'll start to mitigate that in the early part of 2016. And we'll be at the full run rate recovery of that by the time we get to the end of 2016. So I think all of that leads me to think that, yeah, you're right on the second point that, that will have impact on the overall cost structure of the business or on the unit cost...

But – and, of course, you will get more than that I would think, right, that we would see over time that – so, you get the $10 million to $15 million back, and then you get the other improvements that you're looking at? Anthony J. Allott - President, Chief Executive Officer & Director: Over the longer-term, and then what we've said there is that we would expect that the return profile of this project would be kind of in the normal 15% to 20% kind of range on a return basis. Adam J. Greenlee - Chief Operating Officer & Executive Vice President: So long as we understand there is a little bit of overlap on those two topics. So some of those costs we're experiencing, we knew we had embedded in our system that helped drive the investment for the plant, not all of them, but some of them. See it's not a perfect two discrete points. There is some of the project that's justified and mitigating some of those costs that we had to take on.

Okay. Understood. Understood. And lastly, could you just remind us some – I know earlier in the company's life as you were, I guess, growing more rapidly with acquisitions, you were willing to run your leverage up, although you were always quick to pay it down. Could you just – given your footprint and your current business mix, if there were opportunities that were larger that came down the road, how do you think about your balance sheet in this day and age? And sort of how much debt would you incur until you would start thinking about equity to top that up, if again, assuming hypothetically an opportunity were available? Anthony J. Allott - President, Chief Executive Officer & Director: Yeah, sure. I think, we've been pretty consistent for quite some time now saying that we thought the kind of the normalized run rate for leverage for us, the goalpost if you will are kind of 2.5 times to 3.5 times year-end net debt to EBITDA leverage. So, I don't think there is much changed about that in terms of how we think about longer term, but for the right opportunity, we certainly would consider leveraging beyond the 3.5 times, I'd point you back to 2011, when we looked at the large transaction in that year, we would have taken the leverage to up 4.25 times, 4.3 times or so. I think, all of that really depends upon, what the cash flow generation profile of the pro forma business looks like. And if it gives us the opportunity to come back in line to that 2.5 time to 3.5 time metric in a relatively short period of time, we'd be happy to do it. I think, in terms of the where the bright line is between where we debt finance and equity finance, I think it all depends upon what the impact to the overall cost-of-debt is with the leverage and appetite to the lending community. So it's a more difficult one to answer, other than to say that we've – of all the deals we've done, we've not done an equity deal. That one deal in 2011, that I referenced would have had an equity component to it. So, it's not something that we were opposed to. It just would take a deal of significant size to probably drive us there.

Okay. Very helpful. Thank you. Anthony J. Allott - President, Chief Executive Officer & Director: Thanks, Chip.

We'll go next to Ghansham Punjabi with Baird. Ghansham Panjabi - Robert W. Baird & Co., Inc. (Broker): Hey, guys. Good morning. Anthony J. Allott - President, Chief Executive Officer & Director: Good morning, Ghansham. Ghansham Panjabi - Robert W. Baird & Co., Inc. (Broker): I guess, first off, post the footprint optimization, what do you think your incremental margins would be for each of your operating segments? Would it be greater than what you had maybe five years ago, or is it basically getting you back to those levels? Anthony J. Allott - President, Chief Executive Officer & Director: Well, it depends by business, of course. I think, in the containers business, the metal can business, our expectation would be to kind of get back to where we were a couple of years prior. Recognize, of course, that with our pass-through of raw materials, all of this is a little hard to answer. But that would be the basic concept there. In the plastics side, ultimately our goal is to improve where we were, if you go back to that time period, and we would view success as getting back to where we were much further back. And I – and we've talked about this before that it's going to be – I think, what we'd like to do is get back to the five year ago in the next few years. And if we can get back to where we were a decade ago, somewhat longer period than that. That may take us really growing into some of these target markets, et cetera, finishing getting this footprint costs down, probably making some more investment in new footprint behind new customers. So, those will be our expectations. I think, the closures business will be the most gradual of all of those partly because what we've done was pretty gradual this year. It's not major changes to the footprint. We already got the Portola – the lion's share of the Portola benefit was already in the numbers from last year. So, I would say of the three, that would be the most gradual. Ghansham Panjabi - Robert W. Baird & Co., Inc. (Broker): Okay. That's really helpful. And then just in terms of sort of secular demand for metal food cans. Target on the retail side announced de-emphasizing the metal soup cans earlier this year. Do you sort of view that as a one-off retailer specific move? Or do you sense that there is a broader push amongst the retailers to change their package bags? Anthony J. Allott - President, Chief Executive Officer & Director: Well, I think, there is a broader push among retailers to focus – and I should say a broader interest among end users to eat more healthy products. And so I think that the retailers are just reacting to that. They're trying to put things on the shelf that are perceived as being healthier, et cetera. And I think in some cases, you're seeing that soup being a good example of that where that moves a little away from the big brands that we supply, moves to smaller regional players in some cases. I think, the answer to your question is going to depend on how our customers view with that challenge and that's kind of what they're all about working on right now. I think that what's interesting is that soup as an example is such a great health product. There is nothing about the can that is detrimental to that fact, and the can is able to deliver that food product at so much lower cost basis than any other package can. That, our own view on this is that there is going to need to be a drive to explain to the consumers the value of soup, which younger consumers don't really understand to work in any kind of package type you can to win that consumer group back in. And then we think that there will be a logical next step to that which is to bring it all back towards canned because that's the lowest cost solution, and that's the best infrastructure solution for our major customers, but that's – so that's going to take some time. The short term of that is definitely there is a drive towards what are perceived as healthier foods, but again our customers can right now come out with and do have organic products. And there is not – again, there is nothing about their process or their packaging that is any less healthy than what those retailers are asking for on the shelves. Ghansham Panjabi - Robert W. Baird & Co., Inc. (Broker): Okay. Thanks so much, guys. Anthony J. Allott - President, Chief Executive Officer & Director: Yeah.

We'll go next to Anthony Pettinari with Citi.

Good morning. Anthony J. Allott - President, Chief Executive Officer & Director: Good morning.

Just following up on Chip's question on Europe. I believe you have two facilities in Greece, are those selling exclusively to Greek customers or are those cans moving around Europe or did you see any impact in the quarter there? Anthony J. Allott - President, Chief Executive Officer & Director: Sure. You're right. We do have two operating facilities in Greece. The primary markets that we're supplying over there are for Feta cheese, olive oil, and peaches, which each of those products are largely exported out of the country. So as we've discussed we've been taking precautionary measures for some time just around the perceived risk and now maybe the real risk that resides there, including very early on we were communicating with our customers that regardless of what currency Greece itself moved to, our agreements were euro based. We've been very selective on any credit that we've extended. Otherwise, we didn't pay either in advance or on delivery. We're also being very careful as to how much cash we accumulate in Greece. So we're holding very minimal cash balances there. We've also just to help manage costs, we've taken some down time in the plants during the peak of the crisis. So as a consequence, the current outlook is that the growing season is actually looking pretty good, particularly for peaches and we're expecting a strong pack. So we're kind of balancing that. The net of it is that we haven't seen any real negative impact in the quarter largely because we took some downtime in the quarter to mitigate cost. And we're expecting that if it settles down, and I think our view is that there's a long way to go before we can say it settled down that we'll take it as it comes, but no meaningful negative impact right now.

Okay. Okay. That's helpful. And then just switching to plastics, last quarter I think you indicated that the Pennsylvania facility will be operational this quarter. And that the Hazelwood facility would be kind of at the end of the year. Are those timelines still intact? And does the kind of volume weakness that you referenced in your earlier comments does that at all impact the timeline for bringing those two facilities online? Adam J. Greenlee - Chief Operating Officer & Executive Vice President: Well, as far as the timing of those facilities, the Northeast Pennsylvania plant will be operational in Q3. So it's in the process of coming up to speed as we speak. The Missouri facility will be towards the end of the year. So we are expecting that still on track in Q4. And as far as having the market softness impacting those facilities coming up, what I would say, a little bit of the same answer I gave a few minutes ago is just that, those new facilities in large part are dependent upon equipment moves of existing assets from other facilities. So, again right now we're really focused on servicing our customers and making sure they get the products that they need. And so, we had a little bit of a delay in again the cost out programs, but those lines are coming from other plants for the most part. But, for those specific facilities, we anticipate that we'll be on our original time schedule, and again Northeast PA in Q3 and St. Louis in Q4.

Okay. That's helpful. I'll turn it over.

We'll go next to Anojja Shah with BMO Capital Markets.

Hi. It's Anojja Shah from Mark Wilde's team at BMO. I just wanted to talk about the plastic containers 2% volume decline. Can you give any additional color on specific product categories or customer types where you saw weakness? Anthony J. Allott - President, Chief Executive Officer & Director: Sure. It's largely in our organic business, and I would say it's spread somewhat across our food, our personal care, and then our distribution markets. And distribution is a difficult one to really quantify, because it does serve so many of the end markets that our products go into. But really food, personal care were the two biggest for us at Silgan.

Okay. That's helpful. Thank you. And could we talk about the impact of resin in 2Q and then your expectations for resin in 3Q? Robert B. Lewis - Executive Vice President & Chief Financial Officer: Sure. Q2 resin really did not have much of an impact either comparatively to prior year or versus Q1. Prices were relatively stable and declined at a similar rate as they did in the prior year. As we go forward, we're expecting relatively flat resin for Q3, so again, no bottom line impact. I think, the important note here is the impact will be on the revenue side. It was on the revenue side in Q2 as we look at prior year. It will also impact Q3 on the revenue side. As we continue to pass through the lower resin cost that we are experiencing in the market and primary resins are down double-digit percent versus prior year. So again, that's just being passed-through on the bottom line to our customers, but it is impacting our revenue line.

Right. Okay. Thank you. And then just, maybe you can give us an update on what you're seeing on the M&A front. Are you seeing lots of properties available and maybe what people's value expectations are? Anthony J. Allott - President, Chief Executive Officer & Director: Sure. It's no question that M&A continues to be an important part of the strategy. We continue to look at all opportunities that are out there and do keep an active pipeline. I think there are a few deals in the market that could be of some interest. As we said in the past, valuations, expectations are pretty high, particularly given the low cost of debt, but again we focus on cash on cash returns around the M&A front as well. But I would say, more broadly, as we kind of come through the summer here, it's feeling a bit like the M&A environment has experienced a typical summer lull, if you will. So while there is a few out there, it doesn't seem to be as active as it was maybe six or 12 months ago.

Okay. Interesting. All right. That's it from me. Thank you very much. Anthony J. Allott - President, Chief Executive Officer & Director: Thank you.

We'll go next to Alex Ovshey with Goldman Sachs. Alex Ovshey - Goldman Sachs & Co.: Thank you. How are you, guys? Anthony J. Allott - President, Chief Executive Officer & Director: Good, Alex. Adam J. Greenlee - Chief Operating Officer & Executive Vice President: Hi Alex. Alex Ovshey - Goldman Sachs & Co.: Couple of questions. Just going back to plastics and the volume weakness, how do you explain why it's soft? In the U.S., I mean the consumer really isn't humming per se, but at the same time, it does sound like things should be pretty steady. And so why should that business continue to decline in this kind of 2% to 3% rate? How do you explain that? Adam J. Greenlee - Chief Operating Officer & Executive Vice President: Well, again, I mean part of the explanation is that we've been going through this portfolio rebalancing effort for the last year and a half now. And that continues. We're cycling in and out of business all the time. And so there is a good component of our market softness that is associated with our rebalancing efforts as well. But really, I'd say we don't see the general uptick in demand for our plastic products in the marketplace. And it may just be a counter trend to the broader economy, but that's our experience. Alex Ovshey - Goldman Sachs & Co.: Okay. Okay. Got it, Adam. And then in terms of the new business, when that does really start to come in, I mean is there any way to quantify in terms of how much revenue that will ultimately add to the segment once you really onboard the new business wins that should make the difference, that'll make a real difference in the business? Adam J. Greenlee - Chief Operating Officer & Executive Vice President: Sure. I mean, again, it's an ongoing process, right. Again, there is always new business coming in and some business exiting at the same time. But I think I probably answer that a little bit as Tony talked about the returns and profitability of the business. I think our expectation is you'll see that hitting the bottom line, and that is where will be most quantifiable on a go-forward basis as we return to historical credit (47:24) margin rates over the medium term. Alex Ovshey - Goldman Sachs & Co.: Okay, got it. And now, can you talk about how the shelf-stable plastic business that you acquired from Rexam is performing? Adam J. Greenlee - Chief Operating Officer & Executive Vice President: Sure. It continues to perform very well, right in line with expectations, not only when we made the acquisition, but post-acquisition as well. They've done an excellent job with new business awards in the U.S. for again the high barrier, shelf-stable packaging and continue to grow the business at a nice pace for that size business, both in the U.S. and we've got good prospects outside of the U.S., but we haven't had that great kind of growth prospect outside of the U.S. at this point. So we were never really planning on that as a major part of that acquisition. We were focused on running the business and continuing to deliver the business as it was performing. So it's right in line with expectations. Alex Ovshey - Goldman Sachs & Co.: Got it. So bottom line, it's not a source of weakness. It's really performing the way you hoped for. Adam J. Greenlee - Chief Operating Officer & Executive Vice President: Not a source of weakness, no. Alex Ovshey - Goldman Sachs & Co.: Excellent. Thank you very much. I'll turn it over.

We'll go next to George Staphos with Bank of America.

Thanks very much. Tony or Adam, I just want to go back to plastics one last time. So, Tony, I heard you say you'd like to get back to the margins of five years ago and that might take two years to three years. And correct me where I'm incorrectly paraphrasing. And I think you said to go back to the margins of 10 years ago would take more time and would take the company being able to grow in some of these target markets as you expect and wish to. Could you remind us because I don't recall, what would you specifically like to see recognizing that resin is going to swing quite a bit and will change percentage margins? What ultimately margin target would you like investor to have in mind for the plastics business over the next three years? And if I go back to the 1990s, you were doing well over 10% operating margins. I think those are a little bit far off. So help us again framing what we should be thinking about at least given your view of the world? Anthony J. Allott - President, Chief Executive Officer & Director: Yes. I think you've actually paraphrased that pretty well. I think the 10% is kind of the number we'd really like to see ourselves get to. And I think what Adam said is right. There is a component of – it's really return on capital because what we have to spend to get there and does that make sense. But with all that said, I believe that the business, if we can do what we believe we're on the path to doing, which is to really have a differentiating capability in terms of brining out new products, new innovation for customers. If we can do that, then I believe that kind of a operating profit level is achievable. And that's sort of what we'd like to get ourselves to.

And that would be within the next call it three years assuming everything else comes together and assuming obviously we hold return on capital, or we don't deal with the return on capital issue here because obviously you could do... Anthony J. Allott - President, Chief Executive Officer & Director: I might put that out just a little bit further. I think that kind of that 10% mark is a little bit more aspirational. That it's going to be more in that kind of five-year timeframe. I think we'll be moving ourselves towards that over the course of next three years or so, but I would say more as a kind of an end point. Again, I've got to caveat it second time that it really is about returns on capital, because if something came along with lower margin but we didn't have to pay a lot for it, we would immediately buy that, drive our margins rate back down...

Sure. Anthony J. Allott - President, Chief Executive Officer & Director: ...as long as the return on capital was good.

One last quickie for me, just the normal swing factors for the rest of the year and the guidance range of $310 million to $330 million, I'm assuming it's almost entirely harvest. But is there anything else that we should be considering as a risk or positive risk factor for that matter for the rest of the year? Thanks, guys. Good luck in the quarter. Anthony J. Allott - President, Chief Executive Officer & Director: Thanks, George. Yes, I would just say, what we I think said at the beginning of this year, which is we've got a lot of balls in the air, right. Every business is moving a lot of assets around building. So, I would just say that more than a typical year, we've got a lot of activities going on. And so I think the number one thing is that all of those stay within a range of what we believe ought to happen, right. So, we've built in some cushion around that, but whether we have enough or not will probably be the biggest risk we have for the remainder of the year. I think the pack is kind of interesting one. First of all, we have a fairly high number assumed in for the pack. Secondly, because of logistical challenge, even if the pack surged way over top, this year more than any year, that might not drop down much profit at all, because the inefficiency it would take for us to kind of keep up with that. So, I think, there is very little upside on the pack in any case. Downside is a different matter. So obviously you have always a bit of a downside with the pack. Those are the big moving pieces, and then the last caveat is certainly the pack season can shift Q3 to Q4 and so we have our normal volatility between those quarters.

Okay. Thanks. I'll turn it over. Anthony J. Allott - President, Chief Executive Officer & Director: Thanks, George.

And we'll go next to Adam Josephson with KeyBanc Capital Markets.

Thanks, Tony. I appreciate it. Just one follow up on pet food and soup. Were there any particular surprises in the quarter in terms of either pet food or soup? I ask partly because the largest soup company just lowered its long-term sales growth forecast this morning just to reflect current food industry conditions. And I was just thinking longer term you think growth in pet food will roughly offset declines in soup such that those two components will average out to be kind of flattish and then you've got fruit and veggie, which is kind of flattish as well? Thanks very much. Anthony J. Allott - President, Chief Executive Officer & Director: I think what you just said there Adam is about right, which is that I think we do expect that pet will continue to grow as it has been. So what you just described is pretty much what's happened for the last five or more years for us. I think soup has been in decline for a period of time. That is probably our expectation at this point. That all fits with what I think the customer you're referring to has recently said. But, as I mentioned earlier, I am somewhat hopeful. I think soup has got an interesting challenge and an interesting opportunity, and we'll have to watch to see how our customers manage their way through that. But I do see the potential for upside in soup. It is a great healthy product that is being somewhat ignored on the shelf. And with the right champion on it and the right investment made to get that story out, personally I believe there is an opportunity there. That's a little outside of our control. So right now we're just assuming that will continue the historic path.

Thanks a lot, Tony. Best of luck. Anthony J. Allott - President, Chief Executive Officer & Director: Thanks, Adam.

And at this time, there are no further questions. Anthony J. Allott - President, Chief Executive Officer & Director: Great. Thank you everyone for the time. Enjoy the rest of your summer. We look forward talking to you about our third in October.