SILGAN HOLDINGS INC - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


			☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021


			☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number 000-22117

SILGAN HOLDINGS INC.

(Exact name of Registrant as specified in its charter)


Delaware		06-1269834
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

4 Landmark Square
Stamford,	Connecticut	06901
(Address of principal executive offices)		(Zip Code)

(203) 975-7110

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	SLGN	Nasdaq Global Select Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2021, the number of shares outstanding of the Registrant’s common stock was 110,408,113.

-1-


SILGAN HOLDINGS INC.

TABLE OF CONTENTS

			Page No.


Part I. Financial Information			3

Item 1. Financial Statements			3

Condensed Consolidated Balance Sheets at June 30, 2021 and 2020 and December 31, 2020			3

Condensed Consolidated Statements of Income for the three and six months ended June 30, 2021 and 2020			4

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020			5

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020			6

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020			7

Notes to Condensed Consolidated Financial Statements			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19

Item 3. Quantitative and Qualitative Disclosures About Market Risk			27

Item 4. Controls and Procedures			27

Part II. Other Information			28

Item 6. Exhibits			28

Signatures			29

-2-

Part I. Financial Information

Item 1. Financial Statements

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)


	June 30, 2021		June 30, 2020		Dec. 31, 2020
	(unaudited)		(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	164,821	$	191,082	$	409,481
Trade accounts receivable, net	891,812		729,275		619,535
Inventories	907,805		821,448		677,534
Prepaid expenses and other current assets	88,818		85,918		92,643
Total current assets	2,053,256		1,827,723		1,799,193

Property, plant and equipment, net	1,832,885		1,729,481		1,840,758
Goodwill	1,719,815		1,668,614		1,741,496
Other intangible assets, net	609,882		635,156		637,208
Other assets, net	508,481		512,082		492,931
	$	6,724,319	$	6,373,056	$	6,511,586

Liabilities and Stockholders’ Equity
Current liabilities:
Revolving loans and current portion of long-term debt	$	240,859	$	391,418	$	28,036
Trade accounts payable	727,523		601,740		802,541
Accrued payroll and related costs	112,270		103,458		130,088
Accrued liabilities	234,503		266,512		230,955
Total current liabilities	1,315,155		1,363,128		1,191,620

Long-term debt	3,176,393		3,106,425		3,223,217
Deferred income taxes	360,027		357,131		355,995
Other liabilities	484,164		456,678		487,881

Stockholders’ equity:
Common stock	1,751		1,751		1,751
Paid-in capital	314,873		296,639		306,363
Retained earnings	2,531,783		2,249,391		2,395,395
Accumulated other comprehensive loss	(263,433)		(297,360)		(260,953)
Treasury stock	(1,196,394)		(1,160,727)		(1,189,683)
Total stockholders’ equity	1,388,580		1,089,694		1,252,873
	$	6,724,319	$	6,373,056	$	6,511,586

See accompanying notes.

-3-

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the three and six months ended June 30, 2021 and 2020

(Dollars and shares in thousands, except per share amounts)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020

Net sales	$	1,348,661	$	1,176,470	$	2,586,771	$	2,206,854
Cost of goods sold	1,113,777		952,375		2,130,421		1,797,661
Gross profit	234,884		224,095		456,350		409,193
Selling, general and administrative expenses	94,394		100,624		191,773		190,487
Rationalization charges	354		1,942		10,711		4,741
Other pension and postretirement income	(12,818)		(9,705)		(25,637)		(19,410)
Income before interest and income taxes	152,954		131,234		279,503		233,375
Interest and other debt expense before loss on early extinguishment of debt	26,406		25,837		52,829		49,326
Loss on early extinguishment of debt	—		—		883		1,481
Interest and other debt expense	26,406		25,837		53,712		50,807
Income before income taxes	126,548		105,397		225,791		182,568
Provision for income taxes	32,072		27,225		58,034		46,796
Net income	$	94,476	$	78,172	$	167,757	$	135,772

Earnings per share:
Basic net income per share	$	0.86	$	0.70	$	1.52	$	1.22
Diluted net income per share	$	0.85	$	0.70	$	1.51	$	1.22

Weighted average number of shares:
Basic	110,442		110,901		110,323		110,879
Effect of dilutive securities	661		433		743		501
Diluted	111,103		111,334		111,066		111,380

See accompanying notes.

-4-

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three and six months ended June 30, 2021 and 2020

(Dollars in thousands)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020

Net income	$	94,476	$	78,172	$	167,757	$	135,772
Other comprehensive income (loss), net of tax:
Changes in net prior service credit and actuarial losses	1,876		1,809		3,754		2,748
Change in fair value of derivatives	828		104		1,469		(2,351)
Foreign currency translation	25,669		(1,576)		(7,703)		(38,015)
Other comprehensive income (loss)	28,373		337		(2,480)		(37,618)
Comprehensive income	$	122,849	$	78,509	$	165,277	$	98,154

See accompanying notes.

-5-

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30, 2021 and 2020

(Dollars in thousands)

(Unaudited)


	2021		2020
Cash flows provided by (used in) operating activities:
Net income	$	167,757	$	135,772
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	122,386		104,197
Rationalization charges	10,711		4,741
Stock compensation expense	10,337		9,056
Loss on early extinguishment of debt	883		1,481
Other changes that provided (used) cash, net of effects from acquisitions:
Trade accounts receivable, net	(277,768)		(179,949)
Inventories	(233,815)		(148,141)
Trade accounts payable	31,825		(68,026)
Accrued liabilities	(24,316)		67,936

Other, net	(17,313)		9,129
Net cash used in operating activities	(209,313)		(63,804)

Cash flows provided by (used in) investing activities:
Purchase of businesses, net of cash acquired	2,305		(941,102)
Capital expenditures	(123,604)		(106,436)
Other, net	4,914		983
Net cash used in investing activities	(116,385)		(1,046,555)

Cash flows provided by (used in) financing activities:
Borrowings under revolving loans	318,141		927,302
Repayments under revolving loans	(105,856)		(570,955)
Proceeds from issuance of long-term debt	499,725		1,639,661
Repayments of long-term debt	(500,000)		(766,170)
Changes in outstanding checks - principally vendors	(84,216)		(79,006)
Dividends paid on common stock	(31,564)		(27,121)
Debt issuance costs	(4,905)		(10,265)

Repurchase of common stock	(8,538)		(13,155)


Net cash provided by financing activities	82,787		1,100,291

Effect of exchange rate changes on cash and cash equivalents	(1,749)		(2,674)

Cash and cash equivalents:
Net decrease	(244,660)		(12,742)
Balance at beginning of year	409,481		203,824
Balance at end of period	$	164,821	$	191,082

Interest paid, net	$	48,026	$	38,058
Income taxes paid, net	47,297		28,974

See accompanying notes.

-6-

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the three and six months ended June 30, 2021 and 2020

(Dollars and shares in thousands, except per share amounts)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020

Common stock - shares outstanding
Balance at beginning of period	110,386		110,834		110,057		110,780
Net issuance of treasury stock for vested restricted stock units	22		52		351		365
Repurchases of common stock	—		—		—		(259)
Balance at end of period	110,408		110,886		110,408		110,886

Common stock - par value
Balance at beginning and end of period	$	1,751	$	1,751	$	1,751	$	1,751

Paid-in capital
Balance at beginning of period	309,635		292,283		306,363		289,422
Stock compensation expense	5,327		4,573		10,337		9,056
Net issuance of treasury stock for vested restricted stock units	(89)		(217)		(1,827)		(1,839)
Balance at end of period	314,873		296,639		314,873		296,639

Retained earnings
Balance at beginning of period	2,452,996		2,184,691		2,395,395		2,141,302
Net income	94,476		78,172		167,757		135,772
Dividends declared on common stock	(15,689)		(13,472)		(31,369)		(27,018)
Adoption of accounting standards update related to credit losses in 2020	—		—		—		(665)
Balance at end of period	2,531,783		2,249,391		2,531,783		2,249,391

Accumulated other comprehensive loss
Balance at beginning of period	(291,806)		(297,697)		(260,953)		(259,742)
Other comprehensive income (loss)	28,373		337		(2,480)		(37,618)
Balance at end of period	(263,433)		(297,360)		(263,433)		(297,360)

Treasury stock
Balance at beginning of period	(1,196,221)		(1,160,453)		(1,189,683)		(1,149,411)
Net issuance of treasury stock for vested restricted stock units	(173)		(274)		(6,711)		(4,382)
Repurchases of common stock	—		—		—		(6,934)
Balance at end of period	(1,196,394)		(1,160,727)		(1,196,394)		(1,160,727)
Total stockholders' equity	$	1,388,580	$	1,089,694	$	1,388,580	$	1,089,694

Dividends declared on common stock per share	$	0.14	$	0.12	$	0.28	$	0.24

See accompanying notes.

-7-

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, 2021 and 2020 and for the

three and six months then ended is unaudited)

Note 1. Significant Accounting Policies

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of Silgan Holdings Inc., or Silgan, have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. The results of operations for any interim period are not necessarily indicative of the results of operations for the full year.

The Condensed Consolidated Balance Sheet at December 31, 2020 has been derived from our audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

You should read the accompanying condensed consolidated financial statements in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Effective with the first quarter of 2021, we renamed our Closures segment as our Dispensing and Specialty Closures segment and our Plastic Containers segment as our Custom Containers segment, in each case to better capture the evolving nature of their products and our ongoing strategic focus. Each of these segments continues to consist of the same operations as prior to it being renamed.

Note 2. Revenue

The following tables present our revenues disaggregated by reportable segment and geography as they best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Revenues by segment were as follows:


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(Dollars in thousands)
Dispensing and Specialty Closures	$	545,768	$	410,468	$	1,055,120	$	767,619
Metal Containers	624,534		597,191		1,178,615		1,105,709
Custom Containers	178,359		168,811		353,036		333,526
	$	1,348,661	$	1,176,470	$	2,586,771	$	2,206,854

Revenues by geography were as follows:


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(Dollars in thousands)
North America	$	968,497	$	897,327	$	1,866,899	$	1,715,000
Europe and other	380,164		279,143		719,872		491,854
	$	1,348,661	$	1,176,470	$	2,586,771	$	2,206,854

Our contract assets primarily consist of unbilled accounts receivable related to over time revenue recognition and were $92.6 million, $80.4 million, and $83.0 million as of June 30, 2021 and 2020 and December 31, 2020, respectively. Unbilled receivables are included in trade accounts receivable, net on our Condensed Consolidated Balance Sheets.

-8-

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, 2021 and 2020 and for the

three and six months then ended is unaudited)

Note 3. Rationalization Charges


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(Dollars in thousands)
Dispensing and Specialty Closures	$	67	$	700	$	5,298	$	1,442
Metal Containers	225		1,153		5,246		3,116
Custom Containers	62		89		167		183
	$	354	$	1,942	$	10,711	$	4,741

Activity in reserves for our rationalization plans were as follows:


	Employee Severance and Benefits		Plant Exit Costs		Non-Cash Asset Write-Down		Total
	(Dollars in thousands)
Balance at December 31, 2020	$	41,005	$	555	$	—	$	41,560
Charged to expense	6,172		(5)		4,544		10,711
Utilized and currency translation	(3,258)		(263)		(4,544)		(8,065)
Balance at June 30, 2021	$	43,919	$	287	$	—	$	44,206

Non-cash asset write-downs were the result of comparing the carrying value of certain production related assets to their fair value using estimated future discounted cash flows, a Level 3 fair value measurement (see Note 7 for information regarding a Level 3 fair value measurement).

Rationalization reserves as of June 30, 2021 were recorded in our Condensed Consolidated Balance Sheet as accrued liabilities of $7.9 million and other liabilities of $36.3 million. Exclusive of the footprint optimization plan for our Metal Container segment and our resulting withdrawal from the Central States, Southeast and Southwest Areas Pension Plan, or the Central States Pension Plan, announced in 2019, remaining expenses and cash expenditures for our rationalization plans are expected to be $2.2 million and $7.0 million, respectively. Remaining expenses for the accretion of interest for the withdrawal liability related to the Central States Pension Plan are expected to average approximately $1.1 million per year and be recognized annually through 2040, and remaining cash expenditures for the withdrawal liability related to the Central States Pension Plan are expected to be approximately $3.1 million annually through 2040.

-9-

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, 2021 and 2020 and for the

three and six months then ended is unaudited)

Note 4. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss is reported in our Condensed Consolidated Statements of Stockholders’ Equity. Amounts included in accumulated other comprehensive loss, net of tax, were as follows:


	Unrecognized Net Defined Benefit Plan Costs		Change in Fair Value of Derivatives		Foreign Currency Translation		Total
	(Dollars in thousands)
Balance at December 31, 2020	$	(168,604)	$	(4,656)	$	(87,693)	$	(260,953)
Other comprehensive loss before reclassifications	—		484		(7,703)		(7,219)
Amounts reclassified from accumulated other comprehensive loss	3,754		985		—		4,739
Other comprehensive loss	3,754		1,469		(7,703)		(2,480)
Balance at June 30, 2021	$	(164,850)	$	(3,187)	$	(95,396)	$	(263,433)

The amounts reclassified to earnings from the unrecognized net defined benefit plan costs component of accumulated other comprehensive loss for the three and six months ended June 30, 2021 were net (losses) of $(2.6) million and $(5.2) million, respectively, excluding income tax benefits of $0.7 million and $1.4 million, respectively. For the three and six months ended June 30, 2021, these net (losses) consisted of amortization of net actuarial (losses) of $(3.0) million and $(6.0) million and amortization of net prior service credit of $0.4 million and $0.8 million, respectively. Amortization of net actuarial losses and net prior service credit was recorded in other pension and postretirement income in our Condensed Consolidated Statements of Income. See Note 9 for further information.

The amounts reclassified to earnings from the change in fair value of derivatives component of accumulated other comprehensive loss for the three and six months ended June 30, 2021 were not significant.

Other comprehensive loss before reclassifications related to foreign currency translation for the three and six months ended June 30, 2021 consisted of (i) foreign currency gains (losses) related to translation of quarter end financial statements of foreign subsidiaries utilizing a functional currency other than the U.S. dollar of $29.1 million and $(22.6) million, respectively, (ii) foreign currency gains related to intra-entity foreign currency transactions that are of a long-term investment nature of $0.5 million and $0.9 million, respectively, and (iii) foreign currency (losses) gains related to our net investment hedges of $(5.2) million and $18.3 million, respectively, excluding an income tax benefit (provision) of $1.3 million and $(4.3) million, respectively. See Note 7 for further discussion.

Note 5. Inventories

Inventories consisted of the following:


	June 30, 2021		June 30, 2020		Dec. 31, 2020
	(Dollars in thousands)
Raw materials	$	302,719	$	298,550	$	270,066
Work-in-process	164,655		165,505		167,100
Finished goods	534,522		499,799		335,346
Other	15,497		14,089		14,610
	1,017,393		977,943		787,122
Adjustment to value inventory at cost on the LIFO method	(109,588)		(156,495)		(109,588)
	$	907,805	$	821,448	$	677,534

-10-

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, 2021 and 2020 and for the

three and six months then ended is unaudited)

Note 6. Long-Term Debt

Long-term debt consisted of the following:


	June 30, 2021		June 30, 2020		Dec. 31, 2020
	(Dollars in thousands)
Bank debt
Bank revolving loans	$	195,859	$	354,000	$	—
U.S. term loans	400,000		900,000		900,000

Other foreign bank revolving and term loans	47,132		42,534		30,407
Total bank debt	642,991		1,296,534		930,407


4¾% Senior Notes	300,000		300,000		300,000
3¼% Senior Notes	770,835		728,520		795,307
4⅛% Senior Notes	600,000		600,000		600,000
2¼% Senior Notes	592,950		560,400		611,775
1.4% Senior Secured Notes	500,000		—		—
Finance leases	33,460		35,102		34,480
Total debt - principal	3,440,236		3,520,556		3,271,969
Less unamortized debt issuance costs and debt discount	22,984		22,713		20,716
Total debt	3,417,252		3,497,843		3,251,253
Less current portion	240,859		391,418		28,036
	$	3,176,393	$	3,106,425	$	3,223,217

At June 30, 2021, the current portion of long-term debt consisted of $195.9 million of bank revolving loans under our amended and restated senior secured credit facility, or the Credit Agreement, $43.1 million of other foreign bank revolving and term loans and $1.9 million of finance leases.

On February 1, 2021, we and certain of our subsidiaries entered into a Second Amendment to Amended and Restated Credit Agreement, or the Second Amendment, with certain lenders party thereto and Wells Fargo Bank, National Association, as administrative agent under the Credit Agreement. The Second Amendment amends the Credit Agreement to provide us with additional flexibility to issue new senior secured notes with related guarantees from our U.S. subsidiaries, which new senior secured notes and related guarantees may be secured on a pari passu basis with the U.S. Obligations by the U.S. Collateral (each as defined in the Second Amendment). The Second Amendment also makes minor technical changes and allows for certain additional internal corporate reorganizations.

1.4% SENIOR SECURED NOTES

On February 10, 2021, we issued $500.0 million aggregate principal amount of our 1.4% Senior Secured Notes due 2026, or the 1.4% Notes, at 99.945 percent of their principal amount, in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended. The proceeds from the sale of the 1.4% Notes were $499.7 million. We used the proceeds from the sale of the 1.4% Notes to prepay $500.0 million of our outstanding term loans under the Credit Agreement. We paid the initial purchasers’ discount and offering expenses related to the sale of the 1.4% Notes with cash on hand. As a result of this prepayment, we recorded a pre-tax charge for the loss on early extinguishment of debt of $0.9 million during the first quarter of 2021 for the write-off of unamortized debt issuance costs.

The 1.4% Notes are guaranteed on a senior secured basis by our U.S. subsidiaries that guarantee the Credit Agreement. The 1.4% Notes are not guaranteed by any of our subsidiaries that do not guarantee the Credit Agreement, any of our foreign subsidiaries or any of our non-wholly owned subsidiaries. The 1.4% Notes and related guarantees are secured by pledges of equity interests, or the Collateral, that are owned by us and by each subsidiary guarantor, which equity interests are the same equity interests pledged to secure the obligations of U.S. borrowers under the Credit Agreement. The 1.4% Notes will share equally in the Collateral with the Credit Agreement. The guarantee of each such subsidiary guarantor will be released to the

-11-

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, 2021 and 2020 and for the

three and six months then ended is unaudited)

extent such subsidiary no longer guarantees the Credit Agreement and in certain other circumstances, and the Collateral pledged by such subsidiary guarantor will also be released upon the release of such subsidiary guarantor’s guarantee.

The 1.4% Notes and related guarantees are senior secured obligations of us and the subsidiary guarantors. The 1.4% Notes and related guarantees rank equally in right of payment with all of our and the subsidiary guarantors’ existing and future senior indebtedness, including under the Credit Agreement and our 4¾% Senior Notes due 2025, or the 4¾% Notes, our 3¼% Senior Notes due 2025, or the 3¼% Notes, our 4⅛% Senior Notes due 2028, or the 4⅛% Notes, and our 2¼% Senior Notes due 2028, or the 2¼% Notes; are senior in right of payment to all of our and the subsidiary guarantors’ future indebtedness that is by its terms expressly subordinated in right of payment to the 1.4% Notes; rank equally in right of payment to all of our and the subsidiary guarantors’ existing and future senior secured indebtedness (including indebtedness under the Credit Agreement) that is secured by the Collateral on a first-priority basis, to the extent of the value of the Collateral; rank effectively senior to all of our and the subsidiary guarantors’ existing and future unsecured indebtedness and indebtedness secured on a junior basis, in each case to the extent of the value of the Collateral; rank effectively junior to all existing and future indebtedness that is secured by liens on assets that do not constitute a part of the Collateral, to the extent of the value of such assets; and are structurally subordinated to all existing and future indebtedness and other liabilities of each of our existing and future subsidiaries that do not guarantee the 1.4% Notes.

As a result of the guarantees by the subsidiary guarantors of the 1.4% Notes, such subsidiaries were also required to guarantee, and have now guaranteed, on a senior unsecured basis the 4¾% Notes, the 3¼% Notes, the 4⅛% Notes and the 2¼% Notes pursuant to supplemental indentures to the indenture for the 4¾% Notes and the 3¼% Notes, the indenture for the 4⅛% Notes and the indenture for the 2¼% Notes.

The 1.4% Notes are not, and are not required to be, registered under the Securities Act of 1933, as amended.

The 1.4% Notes mature on April 1, 2026. Interest on the 1.4% Notes will be payable semi-annually in cash on April 1 and October 1 of each year, beginning on October 1, 2021. The 1.4% Notes were issued pursuant to an indenture by and among Silgan, certain of our U.S. subsidiaries and Wells Fargo Bank, National Association, as trustee and collateral agent, which indenture contains covenants that are generally less restrictive than those in the Credit Agreement and substantially similar to the covenants in the indenture for the 4¾% Notes and the 3¼% Notes, the indenture for the 4⅛% Notes and the indenture for the 2¼% Notes.

Prior to March 1, 2026 (one month prior to the maturity date of the 1.4% Notes, or the Par Call Date) the 1.4% Notes will be redeemable at a redemption price equal to the greater of (i) 100 percent of the principal amount of the 1.4% Notes to be redeemed and (ii) the principal amount of the 1.4% Notes plus a “make-whole” amount, plus, in each case, accrued and unpaid interest thereon to the redemption date. On or after the Par Call Date, the 1.4% Notes will be redeemable at a redemption price equal to 100 percent of the aggregate principal amount of any 1.4% Notes being redeemed, plus accrued and unpaid interest thereon to the redemption date.

We will be required to make an offer to repurchase the 1.4% Notes at a repurchase price equal to 101 percent of their principal amount, plus accrued and unpaid interest to the date of repurchase, upon the occurrence of a change of control repurchase event as provided in the indenture for the 1.4% Notes.

-12-

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, 2021 and 2020 and for the

three and six months then ended is unaudited)

Note 7. Financial Instruments

The financial instruments recorded in our Condensed Consolidated Balance Sheets include cash and cash equivalents, trade accounts receivable, trade accounts payable, debt obligations and swap agreements. Due to their short-term maturity, the carrying amounts of trade accounts receivable and trade accounts payable approximate their fair market values. The following table summarizes the carrying amounts and estimated fair values of our other financial instruments at June 30, 2021:


	Carrying Amount		Fair Value
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	164,821	$	164,821


Liabilities:
Bank debt	$	642,991	$	642,991

4¾% Notes	300,000		304,890
3¼% Notes	770,835		777,850
4⅛% Notes	600,000		622,500
2¼% Notes	592,950		597,397
1.4% Notes	500,000		495,000

Fair Value Measurements

GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). GAAP classifies the inputs used to measure fair value into a hierarchy consisting of three levels. Level 1 inputs represent unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs represent unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability. Level 3 inputs represent unobservable inputs for the asset or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Financial Instruments Measured at Fair Value

The financial assets and liabilities that were measured on a recurring basis at June 30, 2021 consisted of our cash and cash equivalents and derivative instruments. We measured the fair value of cash and cash equivalents using Level 1 inputs. We measured the fair value of our derivative instruments using the income approach. The fair value of our derivative instruments reflects the estimated amounts that we would pay or receive based on the present value of the expected cash flows derived from market interest rates and prices. As such, these derivative instruments were classified within Level 2.

Financial Instruments Not Measured at Fair Value

Our bank debt, 4¾% Notes, 3¼% Notes, 4⅛% Notes, 2¼% Notes and 1.4% Notes were recorded at historical amounts in our Condensed Consolidated Balance Sheets, as we have not elected to measure them at fair value. We measured the fair value of our variable rate bank debt using the market approach based on Level 2 inputs. Fair values of the 4¾% Notes, 3¼% Notes, 4⅛% Notes, 2¼% Notes and 1.4% Notes were estimated based on quoted market prices, a Level 1 input.

Derivative Instruments and Hedging Activities

Our derivative financial instruments were recorded in the Condensed Consolidated Balance Sheets at their fair values. Changes in fair values of derivatives are recorded in each period in earnings or comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction.

-13-

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, 2021 and 2020 and for the

three and six months then ended is unaudited)

We utilize certain derivative financial instruments to manage a portion of our interest rate, foreign currency exchange rate and natural gas cost exposures. We generally limit our use of derivative financial instruments to interest rate, foreign currency exchange rate and natural gas swap agreements. We do not engage in trading or other speculative uses of these financial instruments. For a financial instrument to qualify as a hedge, we must be exposed to interest rate, foreign currency exchange rate or price risk, and the financial instrument must reduce the exposure and be designated as a hedge. Financial instruments qualifying for hedge accounting must maintain a high correlation between the hedging instrument and the item being hedged, both at inception and throughout the hedged period. The notional principal amounts outstanding under foreign currency exchange rate agreements and natural gas swap agreements were not significant as of June 30, 2021.

In addition, we also utilize certain internal hedging strategies to minimize our foreign currency exchange rate risk. Net investment hedges that qualify for hedge accounting result in the recognition of foreign currency gains or losses, net of tax, in accumulated other comprehensive loss.

Interest Rate Swap Agreements

We have entered into two U.S. dollar interest rate swap agreements, each for $50.0 million notional principal amount, to manage a portion of our exposure to interest rate fluctuations. These agreements have a fixed rate of 2.878 percent and mature on March 24, 2023. The difference between amounts to be paid or received on our interest rate swap agreements is recorded in interest and other debt expense in our Condensed Consolidated Statements of Income and was not significant for the three and six months ended June 30, 2021. These agreements are with a financial institution which is expected to fully perform under the terms thereof. The total fair value of our interest rate swap agreements in effect at June 30, 2021 was not significant.

Foreign Currency Exchange Rate Risk

In an effort to minimize our foreign currency exchange rate risk, in addition to limited foreign currency exchange rate derivative financial instruments, we have financed acquisitions of foreign operations primarily with borrowings denominated in Euros and Canadian dollars. In addition, where available, we have borrowed funds in local currency or implemented certain internal hedging strategies to minimize our foreign currency exchange rate risk related to foreign operations, including net investment hedges related to the 3¼% Notes which are Euro denominated. Foreign currency (losses) gains related to our net investment hedges included in accumulated other comprehensive loss for the three and six months ended June 30, 2021 were $(5.2) million and $18.3 million, respectively.

-14-

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, 2021 and 2020 and for the

three and six months then ended is unaudited)

Note 8. Commitments and Contingencies

A competition authority in Germany commenced an antitrust investigation in 2015 involving the industry association for metal packaging in Germany and its members, including our metal closures and metal container subsidiaries in Germany. At the end of April 2018, the European Commission commenced an antitrust investigation involving the metal packaging industry in Europe including our metal closures and metal container subsidiaries, which should effectively close out the investigation in Germany. Given the current stage of the investigation, we cannot reasonably assess what actions may result from these investigations or estimate what costs we may incur as a result thereof.

We are a party to other legal proceedings, contract disputes and claims arising in the ordinary course of our business. We are not a party to, and none of our properties are subject to, any pending legal proceedings which could have a material adverse effect on our business or financial condition.

Note 9. Retirement Benefits

The components of the net periodic pension benefit credit were as follows:


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(Dollars in thousands)
Service cost	$	3,789	$	3,489	$	7,577	$	6,975
Interest cost	4,355		5,710		8,709		11,420
Expected return on plan assets	(19,850)		(17,993)		(39,698)		(35,987)
Amortization of prior service cost	58		56		116		111
Amortization of actuarial losses	3,028		2,934		6,054		5,869

Net periodic benefit credit	$	(8,620)	$	(5,804)	$	(17,242)	$	(11,612)

The components of the net periodic other postretirement benefit credit were as follows:


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(Dollars in thousands)
Service cost	$	28	$	25	$	56	$	48
Interest cost	95		141		190		283
Amortization of prior service credit	(457)		(484)		(913)		(967)
Amortization of actuarial gains	(47)		(69)		(95)		(139)
Net periodic benefit credit	$	(381)	$	(387)	$	(762)	$	(775)

Note 10. Income Taxes

Silgan and its subsidiaries file U.S. Federal income tax returns, as well as income tax returns in various states and foreign jurisdictions. The Internal Revenue Service, or IRS, has completed its review of the 2019 tax year with no change to our filed federal income tax return. We have been accepted into the Compliance Assurance Program for the 2020 and 2021 tax years which provides for the review by the IRS of tax matters relating to our tax return prior to filing.

-15-

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, 2021 and 2020 and for the

three and six months then ended is unaudited)

Note 11. Treasury Stock

On October 17, 2016, our Board of Directors authorized the repurchase by us of up to an aggregate of $300.0 million of our common stock by various means from time to time through and including December 31, 2021. We did not repurchase any shares of our common stock pursuant to this authorization during the six months ended June 30, 2021. At June 30, 2021, we had approximately $76.6 million remaining under this authorization for the repurchase of our common stock.

During the first six months of 2021, we issued 573,232 treasury shares which had an average cost of $3.19 per share for restricted stock units that vested during the period. In accordance with the Silgan Holdings Inc. Amended and Restated 2004 Stock Incentive Plan, we repurchased 222,146 shares of our common stock at an average cost of $38.44 to satisfy minimum employee withholding tax requirements resulting from the vesting of such restricted stock units.

We account for treasury shares using the first-in, first-out (FIFO) cost method. As of June 30, 2021, 64,704,383 shares of our common stock were held in treasury.

Note 12. Stock-Based Compensation

We currently have one stock-based compensation plan in effect under which we have issued options and restricted stock units to our officers, other key employees and outside directors. During the first six months of 2021, 359,469 restricted stock units were granted to certain of our officers, other key employees and outside directors. The fair value of these restricted stock units at the grant date was $13.9 million, which is being amortized ratably over the respective vesting period from the grant date.

-16-

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, 2021 and 2020 and for the

three and six months then ended is unaudited)

Note 13. Segment Information

Reportable segment information was as follows:


	Dispensing and Specialty Closures		Metal Containers		Custom Containers		Corporate		Total
	(Dollars in thousands)
Three Months Ended June 30, 2021
Net sales	$	545,768	$	624,534	$	178,359	$	—	$	1,348,661
Depreciation and amortization(1)	29,101		21,329		9,632		42		60,104
Rationalization charges	67		225		62		—		354
Segment income	73,836		58,635		27,244		(6,761)		152,954

Three Months Ended June 30, 2020
Net sales	$	410,468	$	597,191	$	168,811	$	—	$	1,176,470
Depreciation and amortization(1)	22,026		20,545		9,352		42		51,965
Rationalization charges	700		1,153		89		—		1,942
Segment income	58,581		71,782		22,987		(22,116)		131,234

Six Months Ended June 30, 2021
Net sales	$	1,055,120	$	1,178,615	$	353,036	$	—	$	2,586,771
Depreciation and amortization(1)	57,991		42,578		19,005		81		119,655
Rationalization charges	5,298		5,246		167		—		10,711
Segment income	139,481		104,249		51,730		(15,957)		279,503

Six Months Ended June 30, 2020
Net sales	$	767,619	$	1,105,709	$	333,526	$	—	$	2,206,854
Depreciation and amortization(1)	42,150		41,026		18,840		79		102,095
Rationalization charges	1,442		3,116		183		—		4,741
Segment income	103,810		119,261		45,032		(34,728)		233,375

_____________

(1)Depreciation and amortization excludes amortization of debt discount and debt issuance costs of $1.4 million and $1.1 million for the three months ended June 30, 2021 and 2020, respectively and $2.7 million and $2.1 million for the six months ended June 30, 2021 and 2020, respectively.

Total segment income is reconciled to income before income taxes as follows:


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(Dollars in thousands)
Total segment income	$	152,954	$	131,234	$	279,503	$	233,375
Interest and other debt expense	26,406		25,837		53,712		50,807
Income before income taxes	$	126,548	$	105,397	$	225,791	$	182,568

Sales and segment income of part of our Dispensing and Specialty Closures segment and our Metal Container segment are dependent, in part, upon fruit and vegetable harvests. The size and quality of these harvests varies from year to year, depending in large part upon the weather conditions in applicable regions. Because of the seasonality of the harvests, we have historically

-17-

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, 2021 and 2020 and for the

three and six months then ended is unaudited)

experienced higher unit sales volume in the third quarter of our fiscal year and generated a disproportionate amount of our annual segment income during that quarter.

-18-

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q that are not historical facts are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and Securities Exchange Act of 1934, as amended. Such forward-looking statements are made based upon management’s expectations and beliefs concerning future events impacting us and therefore involve a number of uncertainties and risks, including, but not limited to, those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in our other filings with the Securities and Exchange Commission. As a result, the actual results of our operations or our financial condition could differ materially from those expressed or implied in these forward-looking statements.

General

We are a leading manufacturer of sustainable rigid packaging solutions for consumer goods products. We currently produce dispensing and specialty closures for food, beverage, health care, garden, home, personal care and beauty products; steel and aluminum containers for human and pet food and general line products; and custom designed containers for personal care, food, health care, pharmaceutical, household and industrial chemical, pet food and care, agricultural, automotive and marine chemical products. We are a leading worldwide manufacturer of dispensing and specialty closures, a leading manufacturer of metal containers in North America and Europe, and a leading manufacturer of custom plastic containers in North America for a variety of markets, including the personal care, food, health care and household and industrial chemical markets.

Our objective is to increase shareholder value by efficiently deploying capital and management resources to grow our business, reduce operating costs and build sustainable competitive positions, or franchises, and to complete acquisitions that generate attractive cash returns. We have grown our net sales and income from operations largely through acquisitions but also through internal growth, and we continue to evaluate acquisition opportunities in the consumer goods packaging market. If acquisition opportunities are not identified over a longer period of time, we may use our cash flow to repay debt, repurchase shares of our common stock or increase dividends to our stockholders or for other permitted purposes.

-19-

RESULTS OF OPERATIONS

The following table sets forth certain unaudited income statement data expressed as a percentage of net sales for the periods presented:


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Net sales
Dispensing and Specialty Closures	40.5	%	34.9	%	40.8	%	34.8	%
Metal Containers	46.3		50.8		45.6		50.1
Custom Containers	13.2		14.3		13.6		15.1
Consolidated	100.0		100.0		100.0		100.0
Cost of goods sold	82.6		80.9		82.4		81.5
Gross profit	17.4		19.1		17.6		18.5
Selling, general and administrative expenses	7.0		8.5		7.4		8.6
Rationalization charges	—		0.2		0.4		0.2
Other pension and postretirement income	(0.9)		(0.8)		(1.0)		(0.9)
Income before interest and income taxes	11.3		11.2		10.8		10.6
Interest and other debt expense	1.9		2.2		2.1		2.3
Income before income taxes	9.4		9.0		8.7		8.3
Provision for income taxes	2.4		2.3		2.2		2.1
Net income	7.0	%	6.7	%	6.5	%	6.2	%

Summary unaudited results of operations for the periods presented are provided below.


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(dollars in millions)
Net sales
Dispensing and Specialty Closures	$	545.8	$	410.5	$	1,055.1	$	767.6
Metal Containers	624.5		597.2		1,178.6		1,105.7
Custom Containers	178.4		168.8		353.1		333.5
Consolidated	$	1,348.7	$	1,176.5	$	2,586.8	$	2,206.8

Segment income
Dispensing and Specialty Closures (1)	$	73.8	$	58.6	$	139.5	$	103.8
Metal Containers (2)	58.6		71.8		104.2		119.3
Custom Containers (3)	27.2		23.0		51.7		45.0
Corporate (4)	(6.6)		(22.2)		(15.9)		(34.7)
Consolidated	$	153.0	$	131.2	$	279.5	$	233.4

(1) Includes rationalization charges of $0.1 million and $0.7 million for the three months ended June 30, 2021 and 2020, respectively, and $5.3 million and $1.4 million for the six months ended June 30, 2021 and 2020, respectively. Includes a charge of $3.5 million for the write-up of inventory for purchase accounting for each of the three and six months ended June 30, 2020 as a result of the acquisition of the dispensing operations of the Albéa Group in June 2020.

(2) Includes rationalization charges of $0.2 million and $1.2 million for the three months ended June 30, 2021 and 2020, respectively and $5.2 million and $3.1 million for the six months ended June 30, 2021 and 2020, respectively.

(3) Includes rationalization charges of $0.1 million for each of the three months ended June 30, 2021 and 2020 and $0.2 million for each of the six months ended June 30, 2021 and 2020.

(4) Includes costs attributed to announced acquisitions of $16.1 million and $18.3 million for the three and six months ended June 30, 2020, respectively.

-20-

Three Months Ended June 30, 2021 Compared with Three Months Ended June 30, 2020

Overview. Consolidated net sales were $1.35 billion in the second quarter of 2021, a 14.6 percent increase as compared to the second quarter of 2020 primarily due to the pass through of higher raw material costs, higher unit volumes in the Dispensing and Specialty Closures segment, the impact from favorable foreign currency translation and a more favorable mix of products sold in the Metal Container and Custom Container segments, partially offset by lower volumes in the Metal Container and Custom Container segments. Income before interest and income taxes for the second quarter of 2021 was $153.0 million, a $21.8 million increase as compared to the same period in 2020, primarily due to higher unit volumes and strong operating performance in the Dispensing and Specialty Closures segment, a more favorable mix of products sold and strong operating performance in the Custom Container segment, lower corporate expenses and rationalization charges, higher pension income and the inclusion in the prior year period of a charge for the purchase accounting write-up of inventory of the dispensing operations of the Albéa Group, or the Albéa Dispensing Business, which was acquired in June 2020 and a charge in the Custom Container segment in the prior year period for a non-commercial legal dispute relating to prior periods, partially offset by lower volumes in the Metal Container and Custom Container segments, higher production costs, less efficient manufacturing processes and lower production in the Metal Container segment, the unfavorable impact in the current year period from the delayed pass through of significantly higher resin costs in the Dispensing and Specialty Closures and Custom Container segments and foreign currency transaction losses. Results for the second quarters of 2021 and 2020 included rationalization charges of $0.4 million and $2.0 million, respectively. Results for the second quarter of 2020 also included costs attributed to announced acquisitions of $16.1 million. Net income for the second quarter of 2021 was $94.5 million as compared to $78.2 million for the same period in 2020. Net income per diluted share for the second quarter of 2021 was $0.85 as compared to $0.70 for the same period in 2020.

Net Sales. The $172.2 million increase in consolidated net sales in the second quarter of 2021 as compared to the second quarter of 2020 was the result of higher net sales across all the segments.

Net sales for the Dispensing and Specialty Closures segment increased $135.3 million, or 33.0 percent, in the second quarter of 2021 as compared to the same period in 2020. This increase was primarily the result of higher unit volumes of approximately ten percent, the pass through of higher raw material costs and the impact of favorable foreign currency translation of approximately $17 million. The increase in unit volumes was principally the result of volumes from the Albéa Dispensing Business acquired in June 2020 and a strong recovery in the beverage, beauty and fragrance markets, partially offset by a decrease in volume for hygiene and home cleaning products as compared to the initial pantry filling in response to the emerging COVID-19 pandemic in the second quarter of 2020.

Net sales for the Metal Container segment increased $27.3 million, or 4.6 percent, in the second quarter of 2021 as compared to the same period in 2020. This increase was primarily the result of the pass through of higher raw material and other manufacturing costs, the impact of favorable foreign currency translation of approximately $7 million and a more favorable mix of products sold, partially offset by lower unit volumes of approximately two percent. The decrease in unit volumes was primarily due to production shortfalls caused by raw material and labor supply challenges across the supply chain.

Net sales for the Custom Container segment increased $9.6 million, or 5.7 percent, in the second quarter of 2021 as compared to the same period in 2020. This increase was principally due to the pass through of higher raw material costs, a more favorable mix of products sold and the impact of favorable foreign currency translation of approximately $3 million, partially offset by lower volumes of approximately eleven percent. The decline in volumes was due primarily to unprecedented demand in the prior year quarter for cleaning and sanitizing products as a result of the initial pantry filling in response to the emerging COVID-19 pandemic in the second quarter of 2020.

Gross Profit. Gross profit margin decreased 1.7 percentage points to 17.4 percent in the second quarter of 2021 as compared to the same period in 2020 for the reasons discussed below in "Income before Interest and Income Taxes."

Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of consolidated net sales decreased to 7.0 percent in the second quarter of 2021 as compared to 8.5 percent in the same period in 2020. Selling, general and administrative expenses decreased $6.2 million to $94.4 million for the second quarter of 2021 as compared to $100.6 million for the same period in 2020. The decrease in selling, general and administrative expenses was principally due to lower corporate expenses, primarily as a result of costs attributed to announced acquisitions of $16.1 million incurred in the prior year period, and the inclusion in the prior year period of a charge of $2.8 million in the Custom Container segment for a non-commercial legal dispute relating to prior periods, partially offset by the inclusion of selling, general and administrative expenses from the Albéa Dispensing Business which was acquired in June 2020.

-21-

Income before Interest and Income Taxes. Income before interest and income taxes for the second quarter of 2021 increased by $21.8 million as compared to the second quarter of 2020, and margins increased to 11.3 percent from 11.2 percent over the same periods. The increase in income before interest and income taxes was primarily the result of higher income in the Dispensing and Specialty Closures and Custom Container segments, lower corporate expenses primarily as a result of prior year costs for announced acquisitions and lower rationalization charges, partially offset by lower income in the Metal Container segment. Rationalization charges were $0.4 million and $2.0 million in the second quarters of 2021 and 2020, respectively. The second quarter of 2020 also included the negative impact of a $3.5 million charge related to the purchase accounting write-up of inventory for the Albéa Dispensing Business acquired in June 2020.

Segment income of the Dispensing and Specialty Closures segment for the second quarter of 2021 increased $15.2 million as compared to the same period in 2020, while segment income margin decreased to 13.5 percent from 14.3 percent over the same periods due primarily to the pass through of significantly higher raw material costs. The increase in segment income was primarily due to higher unit volumes, strong operating performance and the inclusion in the prior year period of a $3.5 million charge for the purchase accounting write-up of inventory of the Albéa Dispensing Business, partially offset by the unfavorable impact in the current year period from the delayed pass through of significantly higher resin costs and foreign currency transaction losses.

Segment income of the Metal Container segment for the second quarter of 2021 decreased $13.2 million as compared to the same period in 2020, and segment income margin decreased to 9.4 percent from 12.0 percent over the same periods. The decrease in segment income was due primarily to higher production costs, less efficient manufacturing processes and lower production and volume levels, all due in large part to significant raw material supply issues and labor challenges, partially offset by higher pension income and lower rationalization charges. Rationalization charges were $0.2 million and $1.2 million in the second quarters of 2021 and 2020, respectively.

Segment income of the Custom Container segment for the second quarter of 2021 increased $4.2 million as compared to the same period in 2020, and segment income margin increased to 15.2 percent from 13.6 percent over the same periods. The increase in segment income was primarily attributable to a more favorable mix of products sold, strong operating performance and the inclusion in the prior year period of a $2.8 million charge for a non-commercial legal dispute relating to prior periods, partially offset by lower volumes and the unfavorable impact in the current year period from the delayed pass through of higher resin costs.

Interest and Other Debt Expense. Interest and other debt expense for the second quarter of 2021 increased $0.6 million to $26.4 million as compared to $25.8 million in the same period in 2020. This increase was primarily due to higher weighted average outstanding borrowings during the quarter as a result of the acquisition of the Albéa Dispensing Business in June 2020, partially offset by lower weighted average interest rates during the quarter due to lower variable market rates.

Provision for Income Taxes. The effective tax rates were 25.3 percent and 25.8 percent for the second quarters of 2021 and 2020, respectively.

-22-

Six Months Ended June 30, 2021 Compared with Six Months Ended June, 2020

Overview. Consolidated net sales were $2.59 billion in the first six months of 2021, a 17.2 percent increase as compared to the first six months of 2020 primarily as a result of higher unit volumes in the Dispensing and Specialty Closures and Metal Container segments, the pass through of higher raw material costs, the impact of favorable foreign currency translation and a more favorable mix of products sold in the Dispensing and Specialty Closures and Custom Container segments, partially offset by lower volumes in the Custom Container segment and a higher percentage of smaller cans sold in the Metal Container segment. Income before interest and income taxes for the first six months of 2021 increased by $46.1 million as compared to the same period in 2020 primarily due to higher unit volumes in the Dispensing and Specialty Closures and Metal Container segments, a more favorable mix of products sold and strong operating performance in the Dispensing and Specialty Closures and Custom Container segments, lower corporate expenses, higher pension income, the negative impact in the prior year period of a charge for the purchase accounting write-up of acquired inventory of the Albéa Dispensing Business and the inclusion in the prior year period of a charge in the Custom Container segment for a non-commercial legal dispute relating to prior periods. These increases were partially offset by the unfavorable impact in the current year period from the delayed pass through of higher resin costs in the Dispensing and Specialty Closures and Custom Container segments, higher production costs, less efficient manufacturing processes and lower production levels in the Metal Container segment, lower volumes in the Custom Container segment, higher rationalization charges, a higher percentage of smaller cans sold in the Metal Container segment and foreign currency transaction losses. Results for the first six months of 2021 and 2020 included rationalization charges of $10.7 million and $4.7 million and a loss on early extinguishment of debt of $0.9 million and $1.5 million, respectively. Results for the first six months of 2020 also included costs attributed to acquisitions of $18.3 million. Net income for the first six months of 2021 was $167.8 million as compared to $135.8 million for the same period in 2020. Net income per diluted share for the first six months of 2021 was $1.51 as compared to $1.22 for the same period in 2020.

Net Sales. The $380.0 million increase in consolidated net sales in the first six months of 2021 as compared to the first six months of 2020 was the result of higher net sales across all the segments.

Net sales for the Dispensing and Specialty Closures segment increased $287.5 million, or 37.5 percent, in the first six months of 2021 as compared to the same period in 2020. This increase was primarily the result of higher unit volumes of approximately nine percent, the pass through of higher raw material costs, the impact of favorable foreign currency translation of approximately $27 million and a more favorable mix of products sold. The increase in unit volumes was principally the result of the inclusion of volumes from the Albéa Dispensing Business which was acquired in June 2020 and strong volumes for beverage, beauty and fragrance products.

Net sales for the Metal Container segment increased $72.9 million, or 6.6 percent, in the first six months of 2021 as compared to the same period in 2020. This increase was primarily the result of the pass through of higher raw material and other manufacturing costs, higher unit volumes of approximately four percent and the impact of favorable foreign currency translation of approximately $12 million, partially offset by a higher percentage of smaller cans sold. The increase in unit volumes was primarily due to the continued high consumer demand levels for food cans, partially offset by the negative impact on volume of production shortfalls caused by raw material and labor supply challenges across the supply chain.

Net sales for the Custom Container segment increased $19.6 million, or 5.9 percent, in the first six months of 2021 as compared to the same period in 2020. This increase was primarily due to a more favorable mix of products sold, the pass through of higher raw material costs and the impact of favorable foreign currency translation of approximately $5 million, partially offset by lower volumes of approximately six percent. The decrease in volumes was due primarily to unprecedented demand in the prior year period for cleaning and sanitizing products as a result of the initial pantry filling in response to the emerging COVID-19 pandemic.

Gross Profit. Gross profit margin decreased 0.9 percentage points to 17.6 percent in the first six months of 2021 as compared to the same period in 2020 for the reasons discussed below in "Income before Interest and Income Taxes".

Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of consolidated net sales decreased to 7.4 percent for the first six months of 2021 as compared to 8.6 percent in the same period in 2020. Selling, general and administrative expenses increased $1.3 million to $191.8 million for the first six months of 2021 as compared to $190.5 million for the same period in 2020. The increase in selling, general and administrative expenses was principally the result of the inclusion of selling, general and administrative expenses from the Albéa Dispensing Business which was acquired in June 2020, partially offset by the inclusion in the prior year period of costs attributed to announced acquisitions of $18.3 million, one-time plant employee incentive payments and a charge of $2.8 million in the Custom Container segment for a non-commercial legal dispute relating to prior periods.

-23-

Income before Interest and Income Taxes. Income before interest and income taxes for the first six months of 2021 increased by $46.1 million as compared to the first six months of 2020, and margins increased to 10.8 percent from 10.6 percent over the same periods. The increase in income before interest and income taxes was primarily due to higher income in the Dispensing and Specialty Closures and Custom Container segments and lower corporate expenses primarily as a result of prior year costs for announced acquisitions, partially offset by lower income in the Metal Container segment and higher rationalization charges. Rationalization charges were $10.7 million and $4.7 million for the first six months of 2021 and 2020, respectively.

Segment income of the Dispensing and Specialty Closures segment for the first six months of 2021 increased $35.7 million, as compared to the same period in 2020, while segment income margin decreased to 13.2 percent from 13.5 percent over the same periods due primarily to the pass through of higher raw material costs. The increase in segment income was primarily due to higher unit volumes, strong operating performance, a more favorable mix of products sold and the inclusion in the prior year period of a $3.5 million charge for the purchase accounting write-up of inventory of the Albéa Dispensing Business, partially offset by the unfavorable impact in the current year period from the delayed pass through of higher resin costs, higher rationalization charges and foreign currency transaction losses. Rationalization charges were $5.3 million and $1.4 million in the first six months of 2021 and 2020, respectively.

Segment income of the Metal Container segment for the first six months of 2021 decreased $15.1 million as compared to the same period in 2020, and segment income margin decreased to 8.8 percent from 10.8 percent over the same periods. The decrease in segment income was primarily attributable to higher production costs, less efficient manufacturing processes and lower production levels, a higher percentage of smaller cans sold and higher rationalization charges, partially offset by higher unit volumes. Rationalization charges were $5.2 million and $3.1 million in the first six months of 2021 and 2020, respectively.

Segment income of the Custom Container segment for the first six months of 2021 increased $6.7 million as compared to the same period in 2020, and segment income margin increased to 14.6 percent from 13.5 percent over the same periods. The increase in segment income was primarily attributable to a more favorable mix of products sold, strong operating performance and the inclusion in the prior year period of a $2.8 million charge for a non-commercial legal dispute relating to prior periods, partially offset by lower volumes and the delayed pass through of higher resin costs.

Interest and Other Debt Expense. Interest and other debt expense before loss on early extinguishment of debt for the first six months of 2021 increased $3.5 million to $52.8 million as compared to $49.3 million in the same period in 2020 principally due to higher weighted average outstanding borrowings primarily related to the acquisition of the Albéa Dispensing Business in June 2020, partially offset by lower weighted average interest rates due to lower variable market rates. In February 2021, we issued the 1.4% Notes and utilized the proceeds therefrom to prepay outstanding term loans under the Credit Agreement. In conjunction with this prepayment, we recognized a loss on early extinguishment of debt of $0.9 million in the first quarter of 2021. In the first six months of 2020, we recognized a loss on early extinguishment of debt of $1.5 million in conjunction with the prepayment of term loans under the Credit Agreement.

Provision for Income Taxes. The effective tax rates were 25.7 percent and 25.6 percent for the first six months of 2021 and 2020, respectively.

CAPITAL RESOURCES AND LIQUIDITY

Our principal sources of liquidity have been net cash from operating activities and borrowings under our debt instruments, including our senior secured credit facility. Our liquidity requirements arise from our obligations under the indebtedness incurred in connection with our acquisitions and the refinancing of that indebtedness, capital investment in new and existing equipment, the funding of our seasonal working capital needs and other general corporate uses.

On February 10, 2021, we issued $500.0 million aggregate principal amount of the 1.4% Notes at 99.945 percent of their principal amount. The proceeds from the sale of the 1.4% Notes were $499.7 million. We used the proceeds from the sale of the 1.4% Notes to prepay $500.0 million of our outstanding term loans under the Credit Agreement. We paid the initial purchasers' discount and offering expenses related to the sale of the 1.4% Notes with cash on hand. As a result of this prepayment, we recorded a pre-tax charge for the loss on early extinguishment of debt of $0.9 million during the first quarter of 2021 for the write-off of unamortized debt issuance costs.

You should also read Note 6 to our Condensed Consolidated Financial Statements for the three and six months ended June 30, 2021 included elsewhere in this Quarterly Report.

-24-

For the six months ended June 30, 2021, we used proceeds from the issuance of the 1.4% Notes of $499.7 million, net borrowings of revolving loans of $212.2 million and cash and cash equivalents of $244.7 million to fund repayments of long-term debt of $500.0 million, cash used in operations of $209.3 million, net capital expenditures and other investing activities of $116.4 million, decreases in outstanding checks of $84.2 million, dividends paid on our common stock of $31.6 million, repurchases of our common stock of $8.5 million under our stock-based compensation plan, debt issuance costs of $4.9 million and the negative effect of exchange rate changes on cash and cash equivalents of $1.7 million.

For the six months ended June 30, 2020, we used net proceeds of $1,639.7 million from the issuance of the 2¼% Notes and the additional 4⅛% Notes and from the incremental term loans borrowed under our Credit Agreement, net borrowings of revolving loans of $356.4 million and cash and cash equivalents of $10.0 million to fund the purchases of the Albéa Dispensing Business and Cobra Plastics for $941.1 million, repayments of long-term debt of $766.2 million, net capital expenditures and other investing activities of $105.5 million, decreases in outstanding checks of $79.0 million, cash used in operations of $63.8 million, dividends paid on our common stock of $27.1 million, repurchases of our common stock of $13.1 million, debt issuance costs of $10.3 million and the negative effect of exchange rate changes on cash and cash equivalents of $2.7 million.

At June 30, 2021, we had $195.9 million of revolving loans outstanding under the Credit Agreement. After taking into account outstanding letters of credit, the available portion of revolving loans under the Credit Agreement at June 30, 2021 was $976.0 million and Cdn $15.0 million.

Because we sell metal containers and closures used in fruit and vegetable pack processing, we have seasonal sales. As is common in the industry, we must utilize working capital to build inventory and then carry accounts receivable for some customers beyond the end of the packing season. Due to our seasonal requirements, which generally peak sometime in the summer or early fall, we may incur short-term indebtedness to finance our working capital requirements. Our peak seasonal working capital requirements have historically averaged approximately $350 million. We fund seasonal working capital requirements through revolving loans under the Credit Agreement, other foreign bank loans and cash on hand. We may use the available portion of revolving loans under the Credit Agreement, after taking into account our seasonal needs and outstanding letters of credit, for other general corporate purposes including acquisitions, capital expenditures, dividends, stock repurchases and to refinance or repurchase other debt.

We believe that cash generated from operations and funds from borrowings available under the Credit Agreement and other foreign bank loans will be sufficient to meet our expected operating needs, planned capital expenditures, debt service, tax obligations, pension benefit plan contributions, share repurchases and common stock dividends for the foreseeable future. We continue to evaluate acquisition opportunities in the consumer goods packaging market and may incur additional indebtedness, including indebtedness under the Credit Agreement, to finance any such acquisition.

We are in compliance with all financial and operating covenants contained in our financing agreements and believe that we will continue to be in compliance during 2021 with all of these covenants.

-25-

Guaranteed Securities

Each of the 4¾% Notes, the 3¼% Notes, the 4⅛% Notes, the 2¼% Notes and the 1.4% Notes were issued by Silgan and are guaranteed by certain wholly owned subsidiaries of Silgan, collectively the Obligor Group.

The following summarized financial information relates to the Obligor Group as of June 30, 2021 and December 31, 2020 and for the six months ended June 30, 2021. Intercompany transactions, equity investments and other intercompany activity within the Obligor Group have been eliminated from the summarized financial information. Investments in subsidiaries of Silgan that are not part of the Obligor Group of $1.47 billion and $1.46 billion as of June 30, 2021 and December 31, 2020, respectively, are not included in noncurrent assets in the table below.



	June 30, 2021	Dec. 31, 2020
	(Dollars in millions)

Current assets	$1,270.2	$1,104.1
Noncurrent assets	3,312.4	3,324.0
Current liabilities	952.0	891.1
Noncurrent liabilities	3,709.1	3,744.6

At June 30, 2021 and December 31, 2020, the Obligor Group held current receivables due from other subsidiary companies of $38.0 million and $54.8 million, respectively; long-term notes receivable due from other subsidiary companies of $795.1 million and $818.9 million, respectively; and current payables due to other subsidiary companies of $6.1 million and $13.4 million, respectively.

Six months ended
June 30, 2021

(Dollars in millions)

Net sales

$1,859.4

Gross profit

285.4

Net income

127.6

For the six months ended June 30, 2021, net income in the table above excludes income from equity method investments of other subsidiary companies of $40.2 million. For the six months ended June 30, 2021, the Obligor Group recorded the following transactions with other subsidiary companies: sales to such other subsidiary companies of $21.3 million; net credits from such other subsidiary companies of $15.7 million; and net interest income from such other subsidiary companies of $9.4 million. For the six months ended June 30, 2021, the Obligor Group received dividends from other subsidiary companies of $16.1 million.

Rationalization Charges

We continually evaluate cost reduction opportunities across each of our segments, including rationalizations of our existing facilities through plant closings and downsizings. We use a disciplined approach to identify opportunities that generate attractive cash returns. Under our rationalization plans, we made cash payments of $3.5 million and $3.6 million for the six months ended June 30, 2021 and 2020, respectively. Exclusive of the footprint optimization plan for our Metal Container segment and our resulting withdrawal from the Central States Pension Plan announced in 2019, remaining expenses and cash expenditures for our rationalization plans are expected to be $2.2 million and $7.0 million, respectively. Remaining expenses for the accretion of interest for the withdrawal liability related to the Central States Pension Plan are expected to average approximately $1.1 million per year and be recognized annually through 2040, and remaining cash expenditures for the withdrawal liability related to the Central States Pension Plan are expected to be approximately $3.1 million annually through 2040.

You should also read Note 3 to our Condensed Consolidated Financial Statements for the three and six months ended June 30, 2021 included elsewhere in this Quarterly Report.

-26-

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to our operations result primarily from changes in interest rates and, with respect to our international operations, from foreign currency exchange rates. In the normal course of business, we also have risk related to commodity price changes for items such as natural gas. We employ established policies and procedures to manage our exposure to these risks. Interest rate, foreign currency and commodity pricing transactions are used only to the extent considered necessary to meet our objectives. We do not utilize derivative financial instruments for trading or other speculative purposes.

Information regarding our interest rate risk, foreign currency exchange rate risk and commodity pricing risk has been disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Since such filing, other than the changes discussed in Notes 6 and 7 to our Condensed Consolidated Financial Statements for the three and six months ended June 30, 2021 included elsewhere in this Quarterly Report, there has not been a material change to our interest rate risk, foreign currency exchange rate risk or commodity pricing risk or to our policies and procedures to manage our exposure to these risks.

Item 4. CONTROLS AND PROCEDURES

As required by Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, as of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including the Principal Executive Officer and the Principal Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal controls over financial reporting during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, these internal controls.

On June 1, 2020, we acquired the Albéa Dispensing Business. We are currently in the process of integrating the internal controls and procedures of the Albéa Dispensing Business into our internal controls over financial reporting. As provided under the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations of the Securities and Exchange Commission, we will include the internal controls and procedures of the Albéa Dispensing Business in our annual assessment of the effectiveness of our internal control over financial reporting for our 2021 fiscal year.

-27-

Part II. Other Information

Item 6. Exhibits


Exhibit Number						Description

*3.1						Amendment to the Amended and Restated Certificate of Incorporation of Silgan Holdings Inc. to permit an increase in the size of the Board of Directors for a period of time.

*+10.1						Second Amendment to the Silgan Holdings Inc. Amended and Restated 2004 Stock Incentive Plan.

22						Subsidiary Guarantors and Issuers of Guaranteed Securities (incorporated by reference to Exhibit 22 filed with our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, Commission File No. 000-22117).

*31.1						Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

*31.2						Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

*32.1						Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.

*32.2						Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

___________________

*Filed herewith.

+ Management contract or compensatory plan or arrangement.

-28-

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.


			SILGAN HOLDINGS INC.



Dated: August 4, 2021			/s/ Robert B. Lewis
			Robert B. Lewis
			Executive Vice President and
			Chief Financial Officer
			(Principal Financial and
			Accounting Officer)

-29-