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Silgan Holdings, Inc. (NASDAQ:SLGN)

Q2 2012 Earnings Call

July 25, 2012 11:00 am ET

Executives

Kimberly I. Ulmer – Vice President and Controller

Anthony J. Allott – President and Chief Executive Officer

Robert B. Lewis – Executive Vice President and Chief Financial Officer

Adam J. Greenlee – Executive Vice President and Chief Operating Officer

Analysts

Christopher D. Manuel – Wells Fargo Securities LLC

George Staphos – Bank of America/Merrill Lynch

Ghansham Panjabi – Robert W. Baird & Co. Equity Capital Markets

Adam Josephson – Keybanc Capital Markets

Scott Gaffner – Barclays Capital

Chip Dillon – Vertical Research Partners LLC

Albert T. Kabili – Credit Suisse AG

Christopher W. Butler – Sidoti & Company, LLC

Alton Stump – Longbow Research

Alex Ovshey – Goldman Sachs & Co.

Mark Wilde – Deutsche Bank Securities

Phil Gresh – JPMorgan

Operator

Thank you for joining Silgan Holdings Second Quarter Earnings Call. Today's call is being recorded. At this time, I would like to turn the call over to Kim Ulmer, Vice President and Controller. Please go ahead.

Kimberly I. Ulmer

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 maybe 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 2011 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 these forward-looking statements.

With that, let me turn it over to Tony.

Anthony J. Allott

Thank you, Kim. Welcome everyone to our second quarter 2012 earnings conference call. Our agenda for this morning is review the financial performance for the second quarter and to make a few comments about our outlook for 2012. After our prepared remarks, Bob, Adam and I will be pleased to answer any questions.

As you saw in the press release, our businesses performed well in the quarter, but were challenged with the timing of volume and pack concerns in the metal food can business and weakening demand and softer pricing in Europe as a result of ongoing economic instability.

Nevertheless, we did deliver record adjusted earnings per diluted share of $0.55, posting a nearly 4% gain over the previous record second quarter of 2011 of $0.53 per diluted share. We're not expecting any quick recovery in European fundamentals, nor has the visibility improved to the midwest vegetable pack given the dry hot weather. However, at this time we are confirming our full-year estimates of adjusted earnings per diluted share to be in the range of $2.80 to $2.90.

On a longer-term basis, we are confident each of our business franchises are continuing to be enhanced. This confidence is based on the operational improvement under way in our plastics business, the new plant is being ramped up in important Eastern European and Middle East markets, and the recently announced acquisitions of the Rexam thermoformed food business and the on-task can and closure business in Turkey.

We believe each of these enhances our competitive advantage allowing us to better to meet the needs of our global customers and to continue to drive long-term shareholder value.

With that I’ll now turn over to Bob to review the financial results in more detail and provide additional explanation around our earnings estimates for 2012.

Robert B. Lewis

Thank you, Tony. Good morning, everybody. As Tony highlighted, the second quarter of 2012 was challenging as we delivered adjusted earnings per share at the low end of our expectations. The biggest impact was in our metal container business where economic weakness in Europe led to a weaker demand in certain categories, particularly general line cans and the hot dry growing conditions led to a slower start to the pack and a less favorable mix of products sold, largely due to the timing of shipments.

As a result, we delivered adjusted earnings per share of $0.55 in the second quarter, versus $0.53 in the prior year quarter. On a consolidated basis, net sales for the second quarter of 2012 were $821.6 million, a decrease of $600,000, primarily as a result of unfavorable foreign currency of $18.4 million, partially offset by higher net sales in the plastic container business and the pass through of higher raw material costs.

Net income for the second quarter was $10.6 million or $0.15 per diluted share, compared to second quarter of 2011 net income of $51.2 million or $0.73 per share. The primary drivers behind the change in net income was a $38.7 million loss on early extinguishment of debt recorded this quarter and $27 million net benefit of the Graham termination fee recorded in the second quarter of 2011.

Foreign exchange remain neutral to earnings as we continue to be effectively hedged. Interest expense before the loss on early extinguishment of debt for the quarter decreased to $0.5 million to $16 million versus $16.5 million in the same period a year ago. This decrease was largely driven by lower average interest rates, partially offset by higher average borrowings as a result of the recent 5% senior note issuance and the refinancing of our senior secured credit facility in July 2011.

In addition, we incurred a $38.7 million loss from the early extinguishment of debt as a result of the make-whole provision of the 7.25 notes, which were retired with the proceeds from the 5% note issuance. I’ll also point out that the loss on early extinguishment of debt had a bearing on our effective tax rate for the quarter as the $1.7 million cumulative rate adjustments in certain foreign jurisdictions were applied to a much lower taxable base as a consequence of this loss.

Capital expenditures for the second quarter of 2012 totaled $33.1 million, compared to $50.7 million in the prior year quarter. On a year-to-date basis, capital expenditures totaled $59.5 million in 2012, versus $84.2 million in the prior year. And we do continue to anticipate capital spending for the full year to be in the lower end of our range of $125 million to $150 million as we compressed capital in 2011 to take advantage of the accelerated tax deductions.

Additionally, we paid a quarterly dividend of $0.12 per share, in June with a total cash cost of $8.5 million, and also during the quarter, we repurchased approximately 397,000 shares for an aggregate amount of $17.1 million through a series of open market transactions.

I’ll now provide some specifics regarding to the individual businesses. The metal container business recorded net sales of $479.7 million for the second quarter of 2012, a decrease of $2.6 million versus the prior year quarter. And this decrease was primarily due to unfavorable foreign currency translation of approximately $7.5 million and a less favorable mix of products sold partially offset by higher average selling prices as a result of the pass through of higher raw material costs. Unit volumes were up slightly for the quarter as incremental units from the Nestlé Purina steel can operations were largely offset by volume declined attributable to a slower start for the vegetable pack and general softness in European volumes, particularly in general line.

Income from operations, in the metal container business decreased $2.8 million to $40.1 million for the second quarter of 2012, versus $42.9 million in the same period a year-ago. The decrease in operating income was the result of the less favorable mix of products sold, increased price pressure and volume declines in Europe due to the overall economic weakness and the incurrence of start up costs associated with the four new productions facilities, partially offset by charges in the second quarter of 2011 that did not repeat.

Net sales in the closures business decreased $1.4 million to $183.1 million for the quarter primarily due to unfavorable foreign currency translation of $9.3 million and lower sales in Europe as a result of weak market conditions. Partly offset by favorable unit volumes in the U.S. as single-serve beverages benefited from the hot weather.

Income from operations in the closures business for the second quarter of 2012 increased $200,000 to $22.9 million. This increase was a result of favorable unit volumes in the U.S., continued improvement in manufacturing efficiencies and operating costs savings and a decrease in rationalization charges. These benefits were partially offset by demand weakness and increased pricing pressure in the European markets.

Net sales in the plastic container business increased 3.4 million to 158.8 million in the second quarter of 2012, primarily as a result of favorable mix of products sold and an increase in unit volumes. Both due to strong seasonal sales in the agricultural chemical markets, and certain customers who built inventory ahead of plant shutdowns, unfavorable foreign currency translation offset these gains by approximately $1.6 million.

Operating income in plastic increased to $9.1 million in the second quarter of 2012 versus $4.5 million in the prior year quarter as we again benefited from the year-over-year comparison of the lag pass-through of resin cost changes. The quarter also benefited from a favorable mix of product sold, cost reduction initiatives and continued improvement in operating performance and increase in unit volumes and lower rationalization charges.

Turning now to our outlook for 2012, while we expect continued headwinds in Europe as a result of the difficult economic conditions. A potentially volatile vegetable pack resulting from the difficult growing conditions in the Mid-West and likely rising inflation some of which maybe offset by continued strength in the single-serve beverage market in the U.S.

We are confirming our full year estimate of adjusted net income per diluted share in the range of $2.80 to $2.90. There is some caution that if the adverse growing conditions in the Midwest persist, there could be further risk to pack volumes season.

In addition, we are expecting lower sales in the plastic business, as certain customers will undergo plant shutdowns during the third quarter. As a consequence we are providing a third-quarter 2012 estimate of adjusted earnings per diluted share in the range $1.15 to $1.25, comparatively delivered adjusted earnings of $1.14 per diluted share in the third quarter of 2011.

Additionally, you should note that given the magnitude of the third quarter and the potential impact of un-forecasted movements in harvest days, particularly as a result of adverse growing conditions. The earnings in the back half of the year can shift meaningfully between quarters.

Despite the near-term headwinds created by challenging pack conditions and the macro economic outlook in Europe, this business continues to generate significant free cash flow. As a result, we are confirming our free cash flow estimate for 2012 to be in the range of $200 million to $250 million, excluding the voluntary pension contributions which were funded through the incremental borrowings from the recent senior issuance.

That concludes our prepared comments, so we can open it up for Q&A and I'll turn it back to Junin, who can provide instructions for the Q&A session.

Question-and-Answer Session

Operator

Thank you (Operator Instructions). And we will take our first question from Chris Manuel with Wells Fargo.

Christopher D. Manuel – Wells Fargo Securities LLC

Good morning.

Anthony J. Allott

Good morning, Chris

Christopher Manuel – Wells Fargo

I don’t know if you can hear me. A couple of questions, you sighted a few different (inaudible) in Europe you sighted pricing pressures as well that's something that’s I think newer and then – so I wanted to dive into that little bit, I know you've opened up four new facilities over there, it looks like you've acquired an additional one after the start of this quarter. So, can you talk a little bit about how the environment is there with respect to pricing and also can you give us a little bit of a flavor for how volumes have been if you can?

Anthony J. Allott

There’s a lot of questions there Chris.

Christopher D. Manuel – Wells Fargo Securities LLC

It is.

Anthony J. Allott

Let me just start by clarifying one thing, we've got four plants that are under construction, they were not at all started up yet, so just as a point on that. If you kind of start with your point on pricing first, I think we would tell you there is a couple of things going on in Europe first of all. There is economic conditions which is easily excited. It’s also been cooler and a little bit (Inaudible) so it has not been as hot in Europe as here. So, it’s depending on what business we are talking about that had some impact as well.

And so those are kind of the issues that are weighing on the demand side. The pricing dip that we talked about is, you will recall in Europe that you have annual negotiations in much of the business so you tend to have a price conversation going out with your customers first quarter, drifting perhaps even into the second quarter.

So that's not unusual in that regard. What is if demand is not there, you get a little bit more activity on the competition side around pricing and I would not say that’s widespread, it’s not across-the-board, it’s specific cases and situations. I would characterize it being Western Europe. So when you think about our business, it’s more to the west of our side, it is kind of where we are seeing it. And then I characterize it coming more from the players that tend to be pursuing growth as a longer-term strategy. Although on the closure side you also see a little bit in the players that are can and closure and they’ve combined those operations, so they are a little less focused perhaps on the specifics of the closure side. But all that is pretty situational. That's a long answer to your Europe question. On the volume side…

Christopher D. Manuel – Wells Fargo Securities LLC

That's…

Robert B. Lewis

Yes.

Christopher D. Manuel – Wells Fargo Securities LLC

That's very helpful. The idea being that it’s not something that’s going to – taking a step down through the balance of the year and continue, that’s fair?

Robert B. Lewis

That’s correct – most of that plays out true.

Christopher D. Manuel – Wells Fargo Securities LLC

Okay, and then with the second component, can you give us a sense of where maybe some of the volumes were?

Robert B. Lewis

Yeah, sure. I’ll start with kind of the can volumes for the quarter. On a worldwide basis, volumes were up just about 1% with the U.S. business being up a few basis points more than that. So as a consequence you can conclude and we said that the European volumes were down a touch on a year-over-year basis. So that’s kind of what’s happened there.

And I think we talked a little bit about the early part of the pack having some influence there. I think that’s more against our expectation of what was happening then on the year-over-year comp.

I think if you look back at what happened early in the year, a lot of – there was increased plant acreage that was contracted. The weather was pretty good at early part of the year, so there was some expectation that we would see some early benefit in the pea and green bean category as well as some expectation that customers would start to build some inventory as they typically do – just ahead of the pea pack season. In fact what we saw as the weather turned, the pea pack actually turned out a lot less beneficial than we expected, and then the timing of the green bean pack got pushed around a little bit because of the weather.

And then just with the general malaise around weather, I think people deferred some of those early purchasing, so we’re some move between quarters there. So that kind of rounds out the can discussion and – as to the other volumes maybe Adam can jump in here.

Adam J. Greenlee

Sure. Looking at closures, on a global basis, the unit volume was up slightly versus the prior year. Really driven by a nice volume gain in the U.S. business were the hot dry weather is kind of a counter impact to our closures businesses, and is primarily the plastic side of our business and single-serve beverages, and hot fill beverages consumed during the summer time. So we've seen a really nice run on our hot fill beverage business, in single-serve actually the second quarter. We talked about it on the last call that selling season started early, so we did see some benefit from that volume in Q1 as well. But as we look at our US business we had literally two of our all-time record shipping months, the tail end of quarter. So, the business continues to do very well. Over in Europe, again there has been a different weather environment over there. We continue to see softer volume. Tony talked a little bit about the choppiness of price there as well. So, all in all volumes were up slightly in the business.

And jumping to plastics and we talked about this a bit on the last call. Unit volumes is probably not the best measurement of success in this business, as we are working to better manage our mix, our pound volume was up slightly, our unit volume was up a little bit more than that. So, we're low single-digits in our plastics business for the quarter and that does include the buy forward of specific customers in advance of summer shutdowns.

Robert B. Lewis

That was a big question Chris, so a big answer again.

Christopher D. Manuel – Wells Fargo Securities LLC

Thank you very much. I have a few more questions, but I will jump back in the queue.

Robert B. Lewis

Okay, great.

Operator

(inaudible) from George Staphos of Bank of America/Merrill Lynch.

George Staphos – Bank of America/Merrill Lynch

Thanks, hi guys good morning. A couple to start, as we think about your guidance for the third quarter about 15, about 25, what kind of hack are you anticipating for the third quarter? What's built into your guidance that – the low end, the high end of the range?

Robert B. Lewis

That I would tell you it’s what’s in there is essentially more of a normal pack, you may recall we were thinking we’re going to have a better than normal pack, because last year was, I think our quote on that was worse in recent memories, so we're expecting some recovery. If you look at acreage, plants and et cetera it all looked like we were setting up for a pretty big year, we’re now – we brought ourselves back to normal. So the best I can tell you, if it turns out to be another bad one then we have not factored that fully in.

George Staphos – Bank of America/Merrill Lynch

Okay, and there is enough operating leverage in your business, that normal could be $0.l0 lower, $0.10 plus between above $0.15 and above $0.25 is what you’re saying to?

Anthony J. Allott

Well, add a little bit uncertainty around Europe to that as well, I mean sometimes it might look like a duck on a pond, but there is a lot of paddling, that happens every quarter underneath the water, so there is always some need for room on that, so I wouldn't lay all that to the pack, but certainly there is going to be some movement around the pack that we don't have visibility to, yeah.

George Staphos – Bank of America/Merrill Lynch

Have your customers increase – have the crop progress reports, whatever you might call on early in the third quarter suggested that your guidance is reasonable presumable, it has otherwise you wouldn't have offered that as your guidance, but just wanted to see what you are – what trends you might be seeing thus far in the quarter?

Robert B. Lewis

Yeah, you pretty much have it George, I think if we look at our preliminary data as we come into July, we're seeing sequential improvement in shipments, July versus June, which we would expect. And add to that the fact that really the pack season starts kind of end of July and runs to kind of the peak season all the way to the early part of September. So we are kind of inline with where we would expect to be right now.

George Staphos – Bank of America/Merrill Lynch

Okay, Rob would it be possible to parts of, what is the effect of the slower start to the pack was in the second quarter and similarly if you want to just bundle it as euro weakness, what that was in the second quarter between those two in pre-tax profit terms.

Robert B. Lewis

That’s going to be hard, I mean first of all, just to be clear there’s three things here, right the one that you didn’t mention sort of the mix of the U.S. can business. Now the mix is impacted by the pull for the pack and I could probably give you more detail than you want on that, but it was not a great mix in the quarter. That’s off to recover itself, so really we scale it probably that point – the mix point is the biggest of the group, but a lot of that is around the issue of the pack. And then I think you probably scale little more evenly between the European side to cans and the rest of the pack question…

George Staphos – Bank of America/Merrill Lynch

All right. Can you give us maybe 30 seconds on the mix issue and I’ll turn it over to you. Thanks guys.

Robert B. Lewis

Yeah, essentially there are sort of two components to mix what we’re referring to here, one is pretty straight forward, which is just diameter size of can – it’s just you got variance in that regard. That’s the case here – smaller cans and so per unit less pad – less drop through of it.

The second was a little more confusing. When we talk volume, we talk cans, so we don’t count the end as a unit of volume it just happened to be the way we do it. So what happens in our pack season is – because our customers are buying stuff they haven’t yet filled, they don’t necessarily get these same amount of ends as they do can.

So when you count unit, it might have an end, it might not at this point in the year. As it happens we have in our units of volume in Q2 this year versus last, we have a lot less cans and so ultimately that needs to catch up – right if we got to put an end on the can. So that’s sort of a mix point that there is just because the way we count our units

George Staphos – Bank of America/Merrill Lynch

Okay, thanks. I’ll turn it over. I’ll be back.

Anthony J. Allott

Okay, thanks.

Operator

(Operator Instructions) and we’ll now hear from Ghansham Panjabi from Robert W. Baird.

Ghansham Panjabi – Robert W. Baird & Co. Equity Capital Markets

Hey guys, good morning.

Anthony J. Allott

Good morning, Ghansham.

Ghansham Panjabi – Robert W. Baird & Co. Equity Capital Markets

Hey, just a qualification on the guidance for the back half of the year. Are you assuming any sort of further share buybacks?

Anthony J. Allott

No, there is no incremental share buybacks assumed in our guidance, and the impact of what is already been done.

Ghansham Panjabi – Robert W. Baird & Co. Equity Capital Markets

Got it, got it. And then on closures one of the big [TFT] producers in North America was talking about a slow down in the convenience store channel in 3Q, obviously you had a very, very strong second quarter. What’s the – what do you think thus far in 3Q?

Anthony J. Allott

So far we’ve seen continued good strong demand again I think the TFT water market is different than our hot fill market which are essentially sports drinks. And I think as the warm weather continues throughout the summer, we’re going to see continued strong volume and we don’t see that similar shutdown or slow down of our single-serve beverage.

Ghansham Panjabi – Robert W. Baird & Co. Equity Capital Markets

Okay and then just on the plant start ups in Eastern Europe and the Middle East I think a lot of this was already part of the plan when you acquired (inaudible). Can you touch on how much of that production is early sold out and also what the demand profile is in those specific geographies that you are adding capacity too?

Anthony J. Allott

Yeah, essentially we are adding capacity into the Russian market, into Jordan and into the Ukraine, so really point to the Eastern markets. As we talked about in previous calls we are expecting kind of the commercialization and qualification of those plants to run through the end of 2012 for the three plants, two in Russian, one in Jordan Valley with the Ukraine kind of moving into the early part of 2013. So if you think about at least a portion of that being pack related volume, you are not going to see the benefit of that coming until we get all the way to the ’13 season. So we can’t really give you a specific percentage that’s sold out, although I’ll tell you that we are talking about relatively small plants here as we kind of invest to support the local markets there. So again these are four plants, but not sizable capacity being added.

Ghansham Panjabi – Robert W. Baird & Co. Equity Capital Markets

Okay, in those specific local markets have you seen any deviation and demand versus your other portion of the European business that you’ve?

Robert B. Lewis

No we are still seeing, I mean those are kind of growth markets. Right now no question if Europe continues to get worse those markets will be affected as well. But there is an underlying growth capacity as consumers are starting to get moved from locally grown foods to processed foods et cetera. So again this is a longer-term, in fact I think we’re quite clear about everything (inaudible), it was more of a long-term concept. So you may get bumps in the road depending what happens in Europe on it. But we think these markets will continue to have an underlying organic growth for some long period to come.

Ghansham Panjabi – Robert W. Baird & Co. Equity Capital Markets

Okay, thank you.

Operator

And we’ll take our question from Adam Josephson with Keybanc.

Adam Josephson – Keybanc Capital Markets

Everyone thanks.

Anthony J. Allott

Yeah.

Adam Josephson – Keybanc Capital Markets

First question, how much of your veggie pack comes from the regions directly affected by the heat wave and drought. And when will you have a pretty good sense. Will it be mid-August or even into September as to whether this will be a normal pack or something less than that?

Anthony J. Allott

Yeah, essentially, what – the biggest portion of the pack for us it’s being impacted right now is corn. And most of the drought discussion is more related to kind of sweet corn, it’s really the key in the upper Midwest that impact the sweet corn which is where we have exposure. Corn as a percent of our total volume is probably something that’s less than 5%, and a high single-digit in terms of a volume perspective. So as Mother Nature tends to do, it can correct itself over time. So I think you got it right, we’ll be into the last summer or early fall before we really know where that all falls out.

Adam Josephson – Keybanc Capital Markets

Great, thanks Bob. Second question, how trends in Europe differed in your Vogel new business and in the closures business? And to what extent the trends weakened sequentially?

Anthony J. Allott

How they differ between them, only that the – our closures business is a little bit more Western European and so it’s been a little bit more in the volume issues if you will on that side. Now our can business is again Southern Europe, in Greece. And so Greece is – we haven’t really mentioned it might, but Greece is a very different situation, well, there we’re being very cautious about credit risks. So in some ways we’re denying some volume there to be sure that we’re as much as possible mitigating credit risk. So those are sort of differences between the two. The trends have been – on volume, they’ve kind of consistent across the board, it’s been – I can’t say anything particularly new, I think the consumer is getting a little more concerned. And so I think our customers maybe feeling a little bit more. But I am not sure we can really perceive that sensitivity on it.

Adam Josephson – Keybanc Capital Markets

Right. Thanks, Tony. And how beneficial was the resin pass-through lag for the plastics business in the quarter, and what are your expectations for the balance of the year in that regard?

Adam J. Greenlee

For the quarter, it was probably a couple million dollars something close to 2. As we go forward into Q3, resin actually becomes a headwind for us. We really do think that the prices for resin essentially bottomed out in kind of June and July time period. And there are various increases that have been announced by the manufacturers. So we’re looking at resin increasing through not only the balance of Q3, but also to the balance of year. So, we will see it as a headwind for the remainder of the year.

Adam Josephson – Keybanc Capital Markets

Great. Thanks, Adam. Thanks, everyone

Operator

And we will hear next from Scott Gaffner, with Barclays

Scott Gaffner – Barclays Capital

Good morning.

Robert B. Lewis

Good morning.

Scott Gaffner – Barclays Capital

Just to get a little bit more specific on the metal food container business. I think before you had the stated that you thought the market in North America or in the U.S. in particular for the metal food can industry could be flat in 2012. Given the shift in volumes and your anticipation that the pack is going to be normal now, do you think volumes are actually going to be down year-over-year in the U.S.?

Robert B. Lewis

I think that’s, you are off a little bit. I think what we said for this year was that volumes would be up coming into the year because we’re expecting a recovery of the pack. So, I think the fundamental directional change is still the same that we probably lose that upside given what pack conditions say, but it probably gets back to more of a flat-ish kind of volume outlook for the year.

Scott Gaffner – Barclays Capital

Okay. And maybe you can just give us a little bit more color on the comparisons from last year, because obviously I recall you had a weak pack in the third quarter. Did that continue into the fourth quarter and that they never materialized, is that how to think about the comparison year-over-year?

Robert B. Lewis

Essentially what happened last year the pack was weak, and it ran late, and it kind of came to a rough start. So you didn’t get – typically when you get a late pack, you get some recovery in Q4, now we didn’t quite see that manifests of last year.

Anthony J. Allott

And last year, it was – we dealt with much a variety of different growing regions and issues, for instance, tomatoes were affected right now. We’re not assuming that tomatoes are going to be affected by anything that’s going on. So, it was – it still was a different year last year. We ought to be better this year than last, unless corn really goes south.

Scott Gaffner – Barclays Capital

Right, because, I mean if I have the numbers right, 31% of your metal food can sales, you talked about being in the vegetable market. If corn, 5 to high single-digits, there’s still have a large portion of vegetable food sales that could potentially recovery from last year’s issue?

Anthony J. Allott

Yeah. 30% is probably a little high. I would say it was probably more in the 20 kind of percent, but, yeah it goes beyond corn for sure. The big ones would be corn and tomatoes and then you get green beans and fruit broadly.

Scott Gaffner – Barclays Capital

All right. And just one last question on plastic containers. You mentioned the better manufacturing performance, was a big driver of the margin improvement in the quarter and margin in that segment definitely came in better than we were expecting. Is there anything in particular that is going on there, that you can point to as the improvement there and maybe some lessons you can take from that business to the other businesses.

Anthony J. Allott

Well, sure. I guess I would start by saying we’ve expected kind of a gradual improvement in that business now for sometime. What we’ve really done in our plastics business for 2012 is really focus on blocking and tackling, focus on the customer and meeting their needs and we’ve done a good job at that. So I mean, sure, there is obviously lots that we can learn and share amongst our businesses. Unfortunately, the plastic story is one-off recovery to be perfectly honest with you. So we are learning in plastics from our other businesses and how well they’ve been executing over the course of the last several years to help us continue to recover on plastics. And as we said last quarter, it’s not going to be a straight line of improvement. We’ve had two good quarters. It was the right first step in our recovery plan, but now we’ve got some headwinds that we’re looking at here for the balance of the year as well. And we’ll continue to block and tackle and execute and work to offset those.

Scott Gaffner – Barclays Capital

Okay, thank you.

Robert B. Lewis

Thank you.

Operator

And we’ll hear next from Chip Dillon with Vertical Research Partners.

Chip Dillon – Vertical Research Partners LLC

Yes, good morning.

Robert B. Lewis

Good morning Chip.

Chip Dillon – Vertical Research Partners LLC

As you look at your footprint here, North America, I know that over the years you guys tend to find very solid synergy benefits and operation efficiencies in your plans. And I just didn’t know if we were close to point sort of given the flattish volumes that you laid out for us to maybe seen more facility rationalization in North America, say if not later this year, perhaps next year?

Robert B. Lewis

No, I wouldn’t necessarily say it, I agree with your premise, we’re looking all the time, there is always some analysis going on around, is there something we can do. But right now we’re fairly well utilized across our business.

Anthony J. Allott

And then specifically to metal food can as we’ve closed two plastic container facilities already this year.

Chip Dillon – Vertical Research Partners LLC

Right, good point.

Robert B. Lewis

So I wouldn’t necessarily think that, but I also wouldn’t want to leave you with the sense that we aren’t always kind of twisting that question in our own mind, we were always doing that.

Chip Dillon – Vertical Research Partners LLC

Got you. And then could you talk a little about the scale, and if there is a difference, and your typical food can plant, here in North America versus the ones you acquired in Central and Eastern Europe and I think the ones you’re actually building. If they are different, do you think that’s something that will for the foreseeable future be a structural benefit or do you think that in time you will see the scales converge?

Robert B. Lewis

Yeah, there definitely is a difference between the scales between the U.S. plants and the regional plants that are kind of in the Eastern European markets. Most of the plants in the European markets are much smaller plants and in many cases, kind of one or two line operations serving that local market, most maybe all of our capacity in Europe is all three piece capacity versus a fair bit of two piece capacity in the US. I don’t necessarily at least in the near-term see any change to that part of the model between the two geographies, so I think what is advantage for us is the ability to get into those local growing markets, support the local customers first and be ready when and if, multinationals come into those growing regions.

Chip Dillon – Vertical Research Partners LLC

Got you. And then as a follow-up on the plastic segment which I assume understand the resin business will be part of, is there any change or any I guess just look out we should have for seasonality as you bring that business and should the seasonal pattern change significantly, should we see a seasonal pattern there?

Robert B. Lewis

No, we are not anticipating any change in the seasonal pattern.

Chip Dillon – Vertical Research Partners LLC

Got you. Okay, thank you.

Robert B. Lewis

Thank you.

Operator

And we’ll take our next question from Albert Kabili with Credit Suisse.

Albert T. Kabili – Credit Suisse AG

Hi, thanks. Good morning guys.

Robert B. Lewis

Good morning Al.

Albert T. Kabili – Credit Suisse AG

I guess first on, I guess for Bob, the outlook with the second quarter kind of coming in at the low end and certainly the pack outlook with the Midwest drought worsening I guess help me kind of bridge how you maintain the full year outlook, what’s the positive variance that you’re seeing that helps you maintain that full year outlook?

Robert B. Lewis

Yeah, I think what you’re getting is, some of that is coming from shift of both mix and volume between Q2 and Q3. Obviously some of that is around what we saw in plastic performance. So, I thinks it's all just leading up to kind of how we see the world today, and that’s kind of where we are with the guidance, but no question that there are more risks if you will in front of us given two very well-know items that are out there, which is the European economy and the weather pattern right now in the Midwest.

Anthony J. Allott

Just one other thing that we haven't said on this call, yet, but we've said in the past that we’re a little bit better at forecasting the annual can business, than we are quarterly because of the seasons of our pack bridge over quarters. And so we don't even know how much of what we’re here talking about today and the disappointment to use the word we use has to do with just shifting around between quarters. And so that’s before anybody overreacts to it and we just don't know the answer to that. As Bob pointed out, the mix side we're feeling pretty good with a lot of that shift in the next quarter. So it's not lost it's just deferred. Now the question on corn we don't know yet.

Albert T. Kabili – Credit Suisse AG

Okay, that's fair, but Tony wouldn’t you know that answer already given your July, I mean you’ve seen your July data, so I would assume you would atleast have a pretty good handle on timing shift in terms of mix and timing. Correct me if I am wrong there, and kind of what's the read on that thus far?

Anthony J. Allott

Will it be great if the answer of that was, yes? The fact is that you are going up a curve right now and so you can't, and we are seeing that, I mean, obviously we are seeing increase in volume in July versus June but you would have to see that. The question is really, how does it all come out at the end? I mean there is no question right now that corn is more fragile than we'd like it to be. And so you really don't know until you get through to the end of the capacity.

Albert T. Kabili – Credit Suisse AG

Okay, got it all right. Now on the pricing side of things in Europe and in metal food is there a way of kind of help us sparse out, what the impact was EBIT or our margin just related to pricing with presumably kind of drags on to the rest of the year?

Robert B. Lewis

I would say you are somewhere between $1 million and $2 million, it’s sort of if you try to isolate just a price based somewhere in that range?

Albert T. Kabili – Credit Suisse AG

Okay, got it all right. And on the as we look to the third quarter on the start-up costs, which I think was a couple of million bucks of a headwind this past quarter. Do you get to a flat what is the impact on the start-up in the third quarter on these new geographies in Europe you are expanding into?

Robert B. Lewis

Yeah, I think what we would say and it’s kind of in the release if you look kind of back at the table that we’ll expect to see some of that start-up cost continue at a declining pace through the back half of the year. And as to the Ukraine, could have a small amount that falls into early part of ’13. I think we scoped it in the release that we would see something round about $0.02 in the third quarter declining to $0.01 in the fourth quarter.

Albert T. Kabili – Credit Suisse AG

Okay, got it, all right. And then the last question on my hand is the U.S food can business was the earnings taking in Google I knew that out of the equation, were the earnings in the U.S. fruit can up year-over-year in the second quarter or down because of the mix issue?

Adam J. Greenlee

They were down.

Albert T. Kabili – Credit Suisse AG

Okay, so even with the 1% volume growth in the U.S mix still was that much of a factor, I just don’t remember mix ever being so much of a huge factor, that I guess how it’s down where – how big of a factor was mix?

Robert B. Lewis

I’ll try to put them in order for that reason, mix was one of the biggest points to the quarter, again some of it is very understandable, it’s just you either have ends or you don’t have ends that it will shift next quarter or so but it was meaningful.

Albert T. Kabili – Credit Suisse AG

Okay. All right, and then lastly – high barrier food will that be neutral in the third quarter or with purchase accounting is that going to be a slight headwind?

Anthony J. Allott

Some of that depends on when it closes, right now we probably say it’s September 1, but we don’t know that, it could be as early as July, beginning of August, but I doubt it. But that would have some impact, if not it can be accretive for the quarter for sure, if you only picked up one month, and you had the inventory coming through for that month, it could even be a little bit dilutive on that quarter.

Albert T. Kabili – Credit Suisse AG

Okay. I appreciate it, thanks Tony, have a good luck in the quarter.

Anthony J. Allott

Thanks.

Operator

And we’ll take our next question from Christopher Butler with Sidoti & Company.

Christopher W. Butler – Sidoti & Company, LLC

Hi, good morning guys.

Robert B. Lewis

Good morning, Chris.

Christopher W. Butler – Sidoti & Company, LLC

Not to beat metal cans into the euros, but coming at this again from a slightly different perspective, it sounds as if you need some improvement to the growing conditions in order to get to what’s your considering normal, if things stays exactly kind of as they are right now, and we don’t really get any improvement or it doesn’t get any worse, what kind of effect would that have on EPS?

Robert B. Lewis

Maybe I’ll try and scope it for you in a slightly different fashion, again corn, which is primarily where the risks that’s for us around weather conditions right now is a bit less than 5% of the total, so if you make an assumption on how bad you think corn can actually get, because it won’t all go away, right? So if you mix a percentage of the pack you loose some small percent, low single digit less than 1% of your total volume. Again, it’s going to be in a quarter where you generally get pretty good drop through. So if the pack really falls apart, it could have some meaningful impact. But right now, our guidance assumes that corn largely, you kind of have a normal kind of pack as we come to the weather pattern.

Christopher W. Butler – Sidoti & Company, LLC

Okay. And shifting gears towards the Iberia Food acquisition going through the releases, it look like as a company that they are – the two businesses they sold were, had EBITDA margins about 16%, is your part that acquisition significantly different?

Robert B. Lewis

We think that it’s a very good business we buy. It drives a lot of value to customers, so that maybe a good assumption. I am not sure we can provide much more in that for you.

Christopher W. Butler – Sidoti & Company, LLC

Then sort of the follow-up, then would be working off that assumption. Could you talk to some the growth opportunities that you would see, that would make the valuation more compelling?

Robert B. Lewis

Happy to. Well we think there is a great set for our business. It’s essentially we think we’re combining our leading position and the process to prepare food segment. We have by far the best thermal forming technical capability in the market. In fact we at one time competed with this business and through their technical (inaudible) they essentially managed to take a big chunk of businesses from us because they had a lower cost structure and manage to get thermal foaming to do some pretty complex packages. And so we’ve seen the power of the technical side. We think what we can bring to is the customer base that we serve, and that’s a customer base that is very focused right now on expanding their brands, and making – finding more customers, what you want to call millennial on the go, whatever words you want to use, but those customers kind of broadly are all focused on how do they take their brand and expand it to a more mobile customer audience, and so we think that plastics is going to play an important part of that brand expansion, and we want to be part of bringing that to our customers, and think that our position will help us do that.

Also when we were in this business, we had quite a bit of interest from the international markets, Asia in particularly for us, the Rexam thermoformed food business had been finding some opportunities in Europe, and so our thinking is that our kind of global footprint will also be very helpful for this business, again same customers just on a global basis.

Finally, we think there is going to be good growth in these kind of ready meals for all the reasons that I just said, just the market that are serviced by this business, we think are the same kind of markets that the demographics say will continue to be growth and interesting market. So again, we think it’s a well-positioned business, and believe one plus one is three.

Christopher W. Butler – Sidoti & Company, LLC

As you look to that the globalization part of that can you utilize your existing assets or will this require a build out as well?

Robert B. Lewis

It would be really totally different on the asset side, so it’d be more about commercial position, and maybe geographic location, but certainly not asset.

Christopher W. Butler – Sidoti & Company, LLC

Okay, I appreciate your time.

Robert B. Lewis

Great, thanks.

Operator

Okay, we’ll hear next from Alton Stump with Longbow Research.

Alton Stump – Longbow Research

Yes, thank you. Good morning, I just two quick questions, I guess first one, and hopefully I didn’t missed it, but the food can volumes being up just more than 1% in the U.S. I assume that includes the Nestlé acquisition last fall, it would have stripped that out, how much did actually core food can volumes declined, if you can tell me that in the quarter?

Robert B. Lewis

Yeah, you are right. It does include the incremental volume coming from the Nestlé acquisition. So I think if you strip that out, we would be down slightly on a core basis, which is generally in line with what the industry has done to the quarter.

Alton Stump – Longbow Research

Okay. Thanks. And then just one other question then I’ll hop off, on the share buyback topic obviously you guys haven’t bought back a lot of shares since the end of the 2010, is there any plans to do so either in the back half or as we move into the first part of the next year?

Robert B. Lewis

Yeah, I think you are right. 2010, it was the last large share repurchase we did with the Dutch tender. We have been active throughout the market transactions over the last couple of quarters. I think it still stands that we look at our leverage point, I mean that kind of 2.5 to 3.5 times range and that to the extend that we don’t have opportunities in the M&A front to manage that then share repurchase or in general return to capital for shareholders sits out as a very viable option. So while there is no eminent decision that’s been made, it certainly sits out there as a possibility.

Anthony J. Allott

And we do have outstanding authorization of the $250 million, $260 million at this point.

Alton Stump – Longbow Research

Got you. Okay, thanks, guys.

Operator

And we’ll hear next from Alex Ovshey with Goldman Sachs.

Alex Ovshey – Goldman Sachs & Co.

Good morning, guys.

Anthony J. Allott

Yeah.

Robert B. Lewis

Good morning.

Alex Ovshey – Goldman Sachs & Co.

A couple of clarification question, did you quantify what the positive impact from resin was for the plastic business there in the quarter?

Adam J. Greenlee

Yeah, it was about $2 million.

Alex Ovshey – Goldman Sachs & Co.

Okay. Thanks, Adam. And then I view you correctly, are you expecting resin to be a headwinds in the third quarter?

Robert B. Lewis

We are. Resin prices really did kind of bottom up in that June, July period and we are serine increases down right now as we are into August for pricing. So, and we anticipate further increases the balance of the year.

Alex Ovshey – Goldman Sachs & Co.

Okay. So it seems like there is really no lag in terms of the way that resin impacts the P&L of the plastics business.

Robert B. Lewis

There is a bit of a lag there, but what we benefited from the lag pass-through for the first six months of the year and again there is kind of a perpetual catch up there that will happen in Q3 that will turn negative on us.

Anthony J. Allott

Yeah, the only lag on the cost side is working through your inventory.

Robert B. Lewis

Right.

Alex Ovshey – Goldman Sachs & Co.

Okay, got it. Thank you. And is there any update on what’s going on with the BPA issue in metal food cans, and can you update us on what percentage of your food cans now is BPA free and then how you see that number evolving over the next couple of years?

Anthony J. Allott

Sure, there is certainly – to start with, there is really no update from the governmental side. As you know in March, the FDA came out with what we characterize as a pretty robust defensive science. So that’s still the position. That seems to broadly kind of slowed the debate for now at least. Nonetheless, we continue to move forward and are working all of our alternatives and our goal is to make it available to our customers to have an alternative in every case.

Interestingly we got asked this question, I think two calls ago and answering it, I failed to think about pet food, about our side. So I think we gave a pretty high number of our cans that still have BPA, but I forgot that 30% of our business is in the pet food, which is kind of a not relevant point here. So that number is probably more like 50% of everything we do today, because we are all the time getting, taking BPA out of some packages. But again our view is in the next couple of years we will have a non-BPA solution to offer our customers on all of our packages.

Alex Ovshey – Goldman Sachs & Co.

Okay. Thanks, Tony

Anthony J. Allott

Yep.

Operator

And we’ll hear next from Mark Wilde from Deutsche Bank.

Mark Wilde – Deutsche Bank Securities

Yeah, Tony just a couple of clean ups. So I wondered just with the slowdown appearing to kind of move into some of the emerging markets, whether you think this is going to open up some more opportunities for you on the M&A front over the next 12 months to 18 months on market you’d like to enter?

Anthony J. Allott

It's a good question, let me start by saying that is how we think about turmoil. We tend to think turmoil creates opportunities. So I think in honestly so far we aren't seeing that kind of turmoil in these developing markets, so I'm not sure we've gotten as far as you are thinking, but if it does get to that level. So yeah, we would view it is a possibility.

Mark Wilde – Deutsche Bank Securities

Alright. And then just secondly, can you give us just an update on what you're seeing thin plate prices right now? I know a lot of that is done annually, but just like to get a sense of where the market seems to be moving at the moment, and whether they are able to take advantage of any short-term weakness you might see?

Anthony J. Allott

Yes sure, there is really not much difference from what we’ve talked about at the end of last quarter. So we’re seeing price increase coming through in the U.S. market and kind of the mid-single digit range, a little bit less than that in Europe, largely because Europe had taken a couple of years of the more significant inflation, those kind of a balancing of the global market if you will. There had been some noise and periodically continues to be some noise, around mid-year price increases. As we sit here today, we haven't seen that, and don't really see anything on the fundamental side that would want out, but periodically that does kind of flare up. So as we sit here today, everything is pretty stable from our point of view.

Mark Wilde – Deutsche Bank Securities

Okay that’s very helpful. Thanks a lot, and good luck in the third quarter.

Anthony J. Allott

Thanks.

Operator

And we’ll hear next from Phil Gresh with JPMorgan.

Phil Gresh – JPMorgan

Hey, good morning.

Robert B. Lewis

Good morning.

Phil Gresh – JPMorgan

The comment you made about 1 million or 2 million of price headwind, was that just for your food or is that kind of overall for all of your – including closures.

Robert B. Lewis

I was actually (inaudible).

Phil Gresh – JPMorgan

So, could you tell me what the overall was including closures?

Robert B. Lewis

Not really accurately, quite honestly. I would (inaudible) is another million or so on the closure side, but it’s – we can’t print that exact number.

Phil Gresh – JPMorgan

Got it, okay. And then just on the acquisition that you made, the Rexam acquisition. Last call, you made a comment about the ability to get back to your prior peak margins there or something close to that would be dependent on either market penetration or some kind of acquisition cycle occurring in the business. And I'm wondering, if should we see this as the first step of a multistep process in plastics or is it just kind of a one off opportunity that you saw out there, and how do you think that this may or may not impact your ability to improve your core margins.

Robert B. Lewis

First of all I would view it as one off. It does not have to do with a particular other (inaudible) on premium plastic business. To be honest, we don't really think about when we buy things, we aren’t thinking the margin is much. And by the time, we get through all the purchase accounting, it is the margins will be different than they were before we bought it, because they will get all the amortization on top of it. So, when we talk margins, we are talking more about the fundamental business and making real improvement to the fundamental business.

Phil Gresh – JPMorgan

Understood, so you don’t see this is something that will help you I guess absorb either maybe get rid of some more lower margin business and your core business and absorb additional capacity or anything like that.

Robert B. Lewis

No, this is a pretty different business and so well it’s part of plastics and it is a plastic package. It’s pretty unique. It’s a unique plant servicing, a unique set of customers. And so, I don’t think it has much impact on the reminder of the plastic business.

Phil Gresh – JPMorgan

Understood. Okay. And then, just in Eastern Europe, I mean are you guys seeing capacity changes over there, increases from anybody else or would you say kind of your approach with the plants you are adding is more unique?

Anthony J. Allott

No, I would say there are other participants that are adding capacity as the market grows and the opportunities grow. So I don’t think we are that unique. What is a little unique for us is that we aren’t deep in the Western Europe can side, and yet we have we think kind of a good worldwide position to bring the global customers as they go into those developing regions, but we’re not the only ones who want to supply growth into those regions.

Phil Gresh – JPMorgan

Right, right. Okay. And then, just in terms of the other opportunities that might be available to you on the food can side, is Asia a region you are considering at this point or is that not something that’s on the table?

Anthony J. Allott

In food can specifically?

Phil Gresh – JPMorgan

Yes.

Anthony J. Allott

No, I would not put it very high on the list. I think what often happens is you get a developing market that, some markets are likely to become a [retort] food can type market and others are not. And I don’t think we’re in Asia. So far we would be more watching that and undecided at this point, but that’s going to be a huge market opportunity.

Phil Gresh – JPMorgan

Okay. All right. Thanks a lot.

Operator

And we’ll take a follow-up question from George Staphos with Bank of America/Merrill Lynch.

George Staphos – Bank of America/Merrill Lynch

Thanks. Hi, guys. A couple of follow-ups and then one bigger picture. First, I wasn’t quite sure, I think you are answering Alton’s question about Rexam and whether if you grow that business internationally, obviously some of the deal closes, whether it will require brick and mortar or whether you will be able to grow it within your existing operations, so if you could provide a little more clarity there that will be helpful?

Robert B. Lewis

Yeah, I think I was trying to say that the assets that make the package are new assets, whether we could use the foot print is a possibility.

George Staphos – Bank of America/Merrill Lynch

I would imagine, so these ones are not food can one so …

Robert B. Lewis

Exactly.

George Staphos – Bank of America/Merrill Lynch

So hopefully, okay. Secondly back to the mix question I totally understand the lack of an end perhaps nothing sold with the can in a given quarter, we are hopeful that will pick up in a later quarter, but why would less volume if that’s the key issue and uncertainty lead to a trade down to smaller units versus larger units. I’m guessing presumably whatever your larger customers are hoping to display on the shelf is going to be driven by what we are all buying and finding favorable at the store level and based on whatever how we feel about our personal income, if anything maybe larger size packages would tend to be more in favor versus smaller sizes. So why are you seeing a mix shift to lower units in this case?

Robert B. Lewis

Yeah, I wouldn’t say trade down, I think it’s just a question of the timing of when the can get filled. And certain businesses go to bigger cans, certain businesses go to smaller cans. So, fruit and vegetable for example tends to go to larger cans either there is certain amount of that that’s to the restaurant industry and institutional and so it just has more to do with the timing of all that, George.

George Staphos – Bank of America/Merrill Lynch

Okay, that makes sense. I guess the last question I had for you, I’m not trying to overdo, you know one quarter that you thought was disappointing largely for issues that were probably out of your control. Over the last number of years, you bought Global and new you made a number of acquisitions, you expand internationally, now you’re acquiring Rexam, you are doing (inaudible), do we get to a point where as investors we need to start worrying whether Silgan has too many irons in the fire, how do you feel about your ability to manage the business, control the business, given the expansion that you’ve seen in the two or three years? Thanks guys.

Robert B. Lewis

Great question. I would start by saying that it’s absolutely something we think about all the time, and I think we’ve said it before. With the very first question, we do an acquisition we think about management. So right from the beginning, we’re on that, that point. I think we’ve said in the past, there are capital projects we don’t do, because we think our people have enough in their hands. So regularly, we walk away from opportunities for that same question.

Now with that said, do I think we’re anywhere near that? I personally don’t think that, I think the depth of our management is good as it’s been. I think we’ve got great managers over each part of businesses. I think as you know, the way we operate is, we believe in fairly autonomous, independent, individual management teams.

And so we really, we can leverage that in so many different ways. And then, I look at, I look at the bubbling new team, and I think we’ve brought in a great team there who frankly are doing an excellent job in the – dealing with the diversity of the market. So frankly, as I look at the acquisitions we’ve done so far, I think we’ve just gotten deeper on the management team, and things that we can leverage going forward.

So I think it’s a good question, I think everyone will form their own opinion on it, but if you ask ops here in the room, that isn’t what we think is happening. I think we are just – as packs come and go, and I don’t want to underplay it, I mean we’ll see how it all plays out. And Europe, I think you could have asked a different question, we’ve done a couple of acquisitions in Europe, and Europe looks a little bit rough right now. How do we feel about that? I think that would be a more direct question, and I always say, even there is we think long-term.

And on a long-term basis, we think that’s an important for the kind of packages and customer that we work in. And we do think the development of the Eastern European market is going to continue. So even, my own question, I think we feel very good about the spot we’re in.

George Staphos – Bank of America/Merrill Lynch

That is fair enough. I would say that maybe not for you – growing often times is tougher for our companies to do than they anticipate, rather than improving performance from sort of existing operations, so we'll see how thing play out for you. You would conclude though nothing in this quarter was related to lack of execution or lack of information coming up the chain of command, will that be fair?

Robert B. Lewis

Quite the opposite. In fact, if you look at the (inaudible) business, despite everything we talked about it is basically flat with the same time a year ago. So, I mean it’s again, you are right, that’s not how we view this quarter at all.

George Staphos – Bank of America/Merrill Lynch

Okay, thanks guys.

Robert B. Lewis

Thanks George.

Operator

And we’ll take another follow up question from Christ Manuel with Wells Fargo.

Christopher D. Manuel – Wells Fargo Securities LLC

Just a couple of quick ones, first in the plastics business, I mean you had terrific performance there in the first half, I know you've had some resin help there, but just kind of looking at the numbers you’ve done more in the first half this year than you did in either all of 2011 or 2010. So, clearly off to a good start and I know a lot of that’s executional changes. When you talk a little bit about customer pulling ahead and some movement from 2Q to 3Q or into 2Q from 3Q, can give us a little more color there and then maybe what should we expect the back half of the year and we look at what the business did last year in Q's 3 and 4, there was a lot more pull to the front half or either the back half of the year is, is kind of what you did second half last year maybe something we could anticipate second half this year, so maybe a little bit more color that in number one?

Robert B. Lewis

I'll start by saying, I shall hope not for the second half of the year, but I guess to go back to the beginning of your question, as customers pull inventory in advance there was probably an operating income pull of about $1 million from Q3 and Q2, so we'll start there resin again we said was about a couple million dollar in the quarter that’s going to now go against us.

So we're losing the profit pull through and the tailwind of resin, so the next point I would like to try to make is that as we look at this business. Now, the core of the business has improved versus where we were last year and so on a steady-state basis. I think we're looking at this business right now at $6 million or $7 million from an operating income per quarter standpoint. And that's when you take out all the noise of resin and customer pro forwards or buy ahead and that’s better than it was last year. So, you’ll have to put the noise back on to that to get to kind of projection, but we're feeling much better about the core of the business itself.

Christopher D. Manuel – Wells Fargo Securities LLC

Okay, that's very helpful. My second question was around a couple of the acquisitions you've done, and I recognized that this year, I'm going to borrow your term, it’s going to be kind of noisy as this things come on stream given timings of purchase accounting and debt levels as you lowed the depreciation and things on businesses. But what if we were to look at 2013, what type of multiple would you anticipate that these would have look like or give us a sense as to what you’ve added, and then also kind of in relation to what you paid, I’m guessing it’s probably going to be quite different between the plastic piece and the food can piece, but can you give us some sort of sense as to sizes or how we should think about that.

Anthony J. Allott

Sure, I think we would – first of all, I think we said and nothing has changed on this. That our view is going to be kind of modest accretion, when we get into next year. And that is primarily, we tell at the Rexam thermoformed business there. And so it's in our view, is that – it's going to be about growth going forward that again there will be some accretion but not big. I can’t tell you specific, I think, if you look at what our expectation is for next year, that business is probably going to be after taking the tax benefit and it’s probably going to be something like a seven times of next year’s numbers, something like that.

So a pretty full price for anything Silgan has acquired, and the reason is the fit, we think that fits there in the growth opportunity. You’re right at the can side and Turkey is lower than that. And so that one should be – would be more accretive except that its size is so small. So but that should give you an idea that that one is certainly purchased more on what you would expect a metal kind of a multiple.

Christopher D. Manuel – Wells Fargo Securities LLC

Okay, that’s helpful and then just the last two little ones, one is when we think about that plant you acquired in Turkey, is that of similar size to the plants that you are building today.

Anthony J. Allott

Yeah, it’s probably a little bit bigger than the ones we are building today but not at all, I mean so yeah, that’s the right way to think about it. And again as Bob said, that’s true, much of the former wobble in your business, they tend to be a little bit smaller plants, very regional focused and as Bob I mean that the advantage you get from that is sort of an entrepreneurial focus on the market. The disadvantage, where the question came from is you don’t get the same efficiencies of economies upscale. The trick for us try to balance that and try to where we can bring our manufacturing capability to improve the cost side, but to retain the regional market entrepreneurial focus that they have and that’s where we are quite focused on trying to accomplish.

Christopher D. Manuel – Wells Fargo Securities LLC

Okay, and last question, it’s very helpful by the way. When we think about what CapEx would look like going forward obviously with a couple more acquisitions but less on the expansion stuff from all these plants that you have been building, what would – kind of that new 125 to 150 range look like with these new businesses and all those elements kind of taken into account on a go forward basis?

Anthony J. Allott

Yeah, I think we have seen, I will stay with the theme of the term here, we have seen some noise over the last couple of years just as we’ve kind of stepped up, where we’ve accelerated capital for tax purposes, and now we’ve kind of decelerated it. But I don’t know, if there is anything fundamentally creating a step change in the capital needs as a combined business. So I think the 1.20 to 1.50 is probably still reasonably okay. The one caveat that I might put around that is, if we saw quick growth around the thermoforming business where we needed to make a geographic change then maybe there’s a little bit of capital that falls in to that, but not significantly outside of that range.

Christopher D. Manuel – Wells Fargo Securities LLC

Okay, that’s helpful. Thank you, gentlemen.

Anthony J. Allott

Thanks.

Adam J. Greenlee

Thanks.

Operator

And we’ll hear again from Adam Josephson with Keybanc.

Adam Josephson – Keybanc Capital Markets

Thanks again everyone. Just one question. To the extent, the consumer spending in the U.S. remains weak, how much of an impact would that have on a high-barrier food business? I’m just trying to better understand how stable that business is compared to your food can business?

Anthony J. Allott

Well, that’s an interesting question, and not part of the growth I talked about. But it is a higher price point product that they sell to and that our customers sell. So it is one that you would expect and I think experience shows that it in down economy it probably pulls back some. So if the economy in the U.S. gets worse, I would expect that would put a little bit of pressure on it. If the economy in the U.S. ultimately starts getting better, I would expect that will give you a little bit of benefit. I think that answered your question.

Adam Josephson – Keybanc Capital Markets

Yeah, thanks Tony.

Anthony J. Allott

Okay.

Operator

And it appears there are no further questions at this time. Mr. Adam, I like to the conference back over to you for any additional or closing remarks.

Adam J. Greenlee

Great, thank you Jane. Thank you everyone for your time. We appreciate it. We look forward to talking to you about our third quarter in late October.

Operator

And this does conclude today’s Silgan Holdings second quarter earnings call. Thank you for your participation.

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