SILGAN HOLDINGS INC

Previous wording

The following table sets forth certain unaudited income statement data expressed as a percentage of net sales for the three months ended March 31 :

Current wording

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

Previous wording

Summary unaudited results of operations for the three months ended March 31 are provided below.

Current wording

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

Previous wording

Net Sales. In the first quarter of 2024, consolidated net sales were $1.32 billion, a decrease of $101.3 million, or 7.1 percent, as compared to the first quarter of 2023 primarily due to lower volumes across all segments, the unfavorable impact from the pass through of lower raw material costs in the metal containers segment and a less favorable mix of products sold in the dispensing and specialty closures segment. These decreases were partially offset by a more favorable mix of products sold in the metal containers segment and the impact from favorable foreign currency translation.

Current wording

Net Sales. In the second quarter of 2024, consolidated net sales were $1.38 billion, a decrease of $45.3 million, or 3.2 percent, as compared to the second quarter of 2023 primarily due to the unfavorable impact from the pass through of lower raw material costs in the dispensing and specialty closures and metal containers segments, a less favorable mix of products sold in the custom containers segment and the impact from unfavorable foreign currency translation. These decreases were partially offset by higher volumes across all segments, a more favorable mix of products sold in the dispensing and specialty closures segment and the pass through of higher raw material costs in the custom containers segment.

Previous wording

Gross Profit. Gross profit margin increased 0.2 percentage points to 17.0 percent in the first quarter of 2024 as compared to the same period in 2023 primarily for the reasons discussed below in "Income before Interest and Income Taxes."

Current wording

Gross Profit. Gross profit margin increased 1.0 percentage points to 18.5 percent in the second quarter of 2024 and increased 0.6 percentage points to 17.8 percent in the first six months of 2024 as compared to the same periods in 2023 primarily for the reasons discussed below in "Income before Interest and Income Taxes."

Previous wording

Selling, General and Administrative Expenses. In the first quarter of 2024, selling, general and administrative expenses as a percentage of consolidated net sales increased to 7.6 percent as compared to 7.1 percent in the first quarter of 2023. For the first quarter of 2024, selling, general and administrative expenses decreased $0.9 million to $100.5 million as compared to the first quarter of 2023.

Current wording

Selling, General and Administrative Expenses. In the second quarter of 2024, selling, general and administrative expenses as a percentage of consolidated net sales increased to 7.8 percent as compared to 7.1 percent in the second quarter of 2023. For the second quarter of 2024, selling, general and administrative expenses increased $5.5 million to $107.7 million as compared to the second quarter of 2023. In the first six months of 2024, selling, general and administrative expenses as a percentage of consolidated net sales increased to 7.7 percent as compared to 7.2 percent in the first six months of 2023. In the first six months of 2024, selling, general and administrative expenses increased $4.7 million to $208.2 million as compared to the first six months of 2023. The increase in selling, general and administrative expenses for each of the second quarter and the first six months of 2024 was primarily due to $5.5 million of costs attributed to announced acquisitions in the second quarter of 2024, partially offset by the write-off in the prior year period of a tax indemnity from a historical acquisition.

Previous wording

Income before Interest and Income Taxes. In the first quarter of 2024, income before interest and income taxes decreased by $19.5 million to $111.7 million as compared to $131.2 million in the first quarter of 2023, and margins decreased to 8.5 percent from 9.3 percent over the same periods. The decrease in income before interest and income taxes was primarily the result of lower volumes across all segments, the unfavorable impact of selling higher cost metal inventory from the prior year due to lower metal costs in 2024, higher rationalization charges and a more favorable mix of products sold in the custom containers segment, partially offset by improved operating and cost performance in all segments. Rationalization charges were $11.7 million and $4.1 million in the first quarters of 2024 and 2023, respectively.

Current wording

Income before Interest and Income Taxes. In the second quarter of 2024, income before interest and income taxes decreased by $2.1 million to $141.9 million as compared to $144.0 million in the second quarter of 2023, while margins increased to 10.3 percent from 10.1 percent over the same periods. The decrease in income before interest and income taxes was primarily the result of the unfavorable impact of lower fixed cost absorption in the metal containers segment as a result of a significantly lower inventory build due to a reduction in pack plans of a large fruit and vegetable customer to reduce its working capital, higher selling, general and administrative costs and higher rationalization charges, partially offset by improved manufacturing productivity and cost performance in the dispensing and specialty closures segment, higher volumes across all segments and a more favorable mix of products sold in the dispensing and specialty closures segment. Rationalization charges were $6.9 million and $2.7 million in the second quarters of 2024 and 2023, respectively.

Previous wording

Interest and Other Debt Expense. In the first quarter of 2024, interest and other debt expense increased $1.8 million to $38.6 million as compared to $36.8 million in the first quarter of 2023. This increase was primarily due to higher weighted average interest rates.

Current wording

Interest and Other Debt Expense. In the second quarter of 2024, interest and other debt expense decreased $5.5 million to $41.3 million as compared to $46.8 million in the second quarter of 2023. In the first six months of 2024, interest and other debt expense decreased $3.6 million to $80.0 million as compared to $83.6 million in the first six months of 2023. These decreases were primarily due to the write-off in the prior year periods of $3.5 million of accrued interest income associated with a historical acquisition tax indemnity and lower average borrowings in the current year periods, partially offset by the impact of higher weighted average interest rates.

Previous wording

Provision for Income Taxes. For the first quarters of 2024 and 2023, the effective tax rates were 24.5 percent and 23.8 percent, respectively.

Current wording

Provision for Income Taxes. For the second quarters of 2024 and 2023, the effective tax rates were 24.3 percent and 18.8 percent, respectively. For the first six months of 2024 and 2023, the effective tax rates were 24.4 percent and 21.3 percent, respectively. The effective tax rates in the second quarter and the first six months of 2023 were favorably impacted by the reversal of tax reserves associated with a historical acquisition indemnity which unfavorably impacted corporate and interest expense in both periods.

Previous wording

Adjusted EBIT, a non-GAAP financial measure, means income before interest and income taxes excluding, as applicable, acquired intangible asset amortization expense, other pension (income) expense for U.S. pension plans and rationalization charges. Adjusted EBIT margin, a non-GAAP financial measure, means adjusted EBIT divided by segment net sales.

Current wording

Adjusted EBIT, a non-GAAP financial measure, means income before interest and income taxes excluding, as applicable, acquired intangible asset amortization expense, other pension (income) expense for U.S. pension plans, rationalization charges and costs attributed to announced acquisitions. Adjusted EBIT margin, a non-GAAP financial measure, means adjusted EBIT divided by segment net sales.

Previous wording

Acquired intangible asset amortization expense is a non-cash expense related to acquired operations that management believes is not indicative of the on-going performance of the acquired operations. Since the Company’s U.S. pension plans are significantly over funded and have no required cash contributions for the foreseeable future based on current regulations, management views other pension (income) expense from the Company’s U.S. pension plans, which excludes service costs, as not reflective of the operational performance of the Company or its segments. While rationalization costs are incurred on a regular basis, management views these costs more as an investment to generate savings rather than period costs.

Current wording

Acquired intangible asset amortization expense is a non-cash expense related to acquired operations that management believes is not indicative of the on-going performance of the acquired operations. Since the Company’s U.S. pension plans are significantly over funded and have no required cash contributions for the foreseeable future based on current regulations, management views other pension (income) expense from the Company’s U.S. pension plans, which excludes service costs, as not reflective of the operational performance of the Company or its segments. While rationalization costs are incurred on a regular basis, management views these costs more as an investment to generate savings rather than period costs. Costs attributed to announced acquisitions consist of third party fees and expenses that are viewed by management as part of the acquisition and not indicative of the on-going cost structure of the Company.

Previous wording

A reconciliation of such non-GAAP financial measures for the three months ended March 31 is provided below:

Current wording

A reconciliation of such non-GAAP financial measures for the periods presented is provided below:

Previous wording

In the first quarter of 2024, net sales for the dispensing and specialty closures segment decreased $44.0 million, or 7.6 percent, as compared to the first quarter of 2023. This decrease was primarily the result of lower unit volumes of approximately seven percent and a less favorable mix of products sold, partially offset by the impact of favorable foreign currency translation of approximately $5 million. The decrease in unit volumes was principally the result of lower volumes for closures for food and beverage markets due to customer destocking priorities.

Current wording

In the first six months of 2024, net sales for the dispensing and specialty closures segment decreased $38.7 million, or 3.4 percent, as compared to the first six months of 2023. This decrease was primarily the result of lower unit volumes of approximately three percent and the pass through of lower raw material costs, partially offset by the impact of favorable foreign currency translation of approximately $2.0 million and a more favorable mix of products sold. The decrease in unit volumes was principally the result of lower volumes for closures for food and beverage markets due to customer destocking priorities.

Previous wording

In the first quarter of 2024, net sales for the metal containers segment decreased $53.0 million, or 7.9 percent, as compared to the first quarter of 2023. This decrease was primarily the result of lower unit volumes of approximately five percent and the pass through of lower raw material costs, partially offset by a more favorable mix of products sold and the impact of favorable foreign currency translation of approximately $2 million. The decrease in unit volumes was principally the result of customer destocking across several categories in the first quarter of 2024 as compared to very strong customer demand in the first quarter of 2023.

Current wording

In the first six months of 2024, net sales for the metal containers segment decreased $113.1 million, or 8.2 percent, as compared to the first six months of 2023. This decrease was primarily the result of the contractual pass through of lower raw material costs as compared to the lagged contractual pass through of inflation in labor and other manufacturing costs in the prior year period and lower unit volumes of approximately two percent, partially offset by a more favorable mix of products sold and the impact of favorable foreign currency translation of approximately $3.0 million. The decrease in unit volumes was principally the result of customer destocking across several categories in the first quarter of 2024 as compared to very strong customer demand in the first quarter of 2023.

Previous wording

In the first quarter of 2024, adjusted EBIT of the metal containers segment decreased $7.4 million as compared to the first quarter of 2023, and adjusted EBIT margin decreased to 7.3 percent from 7.8 percent for the same periods. The decrease in adjusted EBIT was primarily due to the unfavorable impact of selling higher cost inventory from the prior year in our European operations due to lower metal costs in 2024 and lower unit volumes, partially offset by lower selling, general and administrative costs.

Current wording

In the first six months of 2024, adjusted EBIT of the metal containers segment decreased $24.6 million as compared to the first six months of 2023, and adjusted EBIT margin decreased to 8.2 percent from 9.3 percent for the same periods. The decrease in adjusted EBIT was primarily due to the unfavorable impact of lower fixed cost absorption as a result of a significantly lower inventory build due to the reduction in pack plans of a large fruit and vegetable customer to reduce its working capital, the unfavorable impact of selling higher cost inventory from the prior year in our European operations due to lower metal costs in 2024, and lower unit volumes, partially offset a more favorable mix of products sold.

Previous wording

In the first quarter of 2024, adjusted EBIT of the custom containers segment increased $0.1 million as compared to the first quarter of 2023, and adjusted EBIT margin increased to 12.3 percent from 11.9 percent over the same periods. The increase in adjusted EBIT was primarily attributable to a more favorable mix of products sold, partially offset by lower volumes.

Current wording

In the second quarter of 2024, adjusted EBIT of the custom containers segment increased $4.0 million as compared to the second quarter of 2023, and adjusted EBIT margin increased to 13.6 percent from 11.9 percent over the same periods. The increase in adjusted EBIT was primarily attributable to higher volumes.

Previous wording

For the three months ended March 31, 2024, we used net borrowings of revolving loans of an aggregate of $582.4 million and cash and cash equivalents of $334.3 million to fund cash used in operations of $547.8 million, decreases in outstanding checks of $160.6 million, the repayment of long-term debt of $100.0 million, net capital expenditures and other investing activities of $72.5 million, dividends paid on our common stock of $21.1 million, repurchases of our common stock of $7.7 million, the repayment of principal amounts under finance leases of $0.3 million and the negative effect of exchange rate changes on cash and cash equivalents of $6.7 million.

Current wording

For the six months ended June 30, 2024, we used net borrowings of revolving loans of an aggregate of $664.0 million and cash and cash equivalents of $340.1 million to fund cash used in operations of $526.9 million, decreases in outstanding checks of $160.6 million, the repayment of long-term debt of $100.0 million, net capital expenditures and other investing activities of $128.4 million, dividends paid on our common stock of $41.5 million, the repayment of principal amounts under finance leases of $25.3 million, repurchases of our common stock of $7.7 million and the negative effect of exchange rate changes on cash and cash equivalents of $13.7 million.

Previous wording

For the three months ended March 31, 2023, we used net borrowings of revolving loans and proceeds from other foreign long-term debt of an aggregate of $757.2 million and cash and cash equivalents of $84.6 million (after the positive effect of exchange rate changes of $3.8 million) to fund cash used in operations of $631.8 million, net capital expenditures and other investing activities of $67.0 million, decreases in outstanding checks of $61.4 million, the repayment of long-term debt of $50.7 million, dividends paid on our common stock of $20.6 million, repurchases of our common stock of $13.4 million and the repayment of principal amounts under finance leases of $0.7 million.

Current wording

For the six months ended June 30, 2023, we used net borrowings of revolving loans and proceeds from other foreign long-term debt of an aggregate of $760.2 million and cash and cash equivalents of $349.0 million (including the positive effect of exchange rate changes of $5.7 million) to fund cash used in operations of $811.7 million, net capital expenditures and other investing activities of $117.0 million, decreases in outstanding checks of $61.4 million, the repayment of long-term debt of $51.9 million, dividends paid on our common stock of $40.4 million, repurchases of our common stock of $31.0 million and the repayment of principal amounts under finance leases of $1.5 million.

Previous wording

At March 31, 2024, we had $580.0 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 March 31, 2024 was $899.4 million.

Current wording

At June 30, 2024, we had $665.0 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, 2024 was $814.5 million.

Previous wording

For our suppliers, we believe that we negotiate the best terms possible, including payment terms. In connection therewith, we initiated a SCF program with a major global financial institution. Under this SCF program, a qualifying supplier may elect, but is not obligated, to sell its receivables from us to such financial institution. A participating supplier negotiates its receivables sale arrangements directly with the financial institution under this SCF program. While we are not party to, and do not participate in the negotiation of, such arrangements, such financial institution allows a participating supplier to utilize our creditworthiness in establishing a credit spread in respect of the sale of its receivables from us as well as other applicable terms. This may provide a supplier with more favorable terms than it would be able to secure on its own. We have no economic interest in a supplier’s decision to sell a receivable. Once a qualifying supplier elects to participate in this SCF program and reaches an agreement with the financial institution, the supplier independently elects which individual invoices to us that they sell to the financial institution. All of our payments to a participating supplier are paid to the financial institution on the invoice due date under our agreement with such supplier, regardless of whether the individual invoice was sold by the supplier to the financial institution. The financial institution then pays the supplier on the invoice due date under our agreement with such supplier for any invoices not previously sold by the supplier to the financial institution. Amounts due to a supplier that elects to participate in this SCF program are included in accounts payable in our Condensed Consolidated Balance Sheet, and the associated payments are reflected in net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows. Separate from this SCF program, we and suppliers who participate in this SCF program generally maintain the contractual right to require the other party to negotiate in good faith the existing payment terms as a result of changes in market conditions, including changes in interest rates and general market liquidity, or in some cases for any reason. Outstanding trade accounts payables subject to this SCF program were approximately $252.6 million, $318.4 million and $330.2 million at March 31, 2024 and 2023 and December 31, 2023, respectively.

Current wording

For our suppliers, we believe that we negotiate the best terms possible, including payment terms. In connection therewith, we initiated a SCF program with a major global financial institution. Under this SCF program, a qualifying supplier may elect, but is not obligated, to sell its receivables from us to such financial institution. A participating supplier negotiates its receivables sale arrangements directly with the financial institution under this SCF program. While we are not party to, and do not participate in the negotiation of, such arrangements, such financial institution allows a participating supplier to utilize our creditworthiness in establishing a credit spread in respect of the sale of its receivables from us as well as other applicable terms. This may provide a supplier with more favorable terms than it would be able to secure on its own. We have no economic interest in a supplier’s decision to sell a receivable. Once a qualifying supplier elects to participate in this SCF program and reaches an agreement with the financial institution, the supplier independently elects which individual invoices to us that they sell to the financial institution. All of our payments to a participating supplier are paid to the financial institution on the invoice due date under our agreement with such supplier, regardless of whether the individual invoice was sold by the supplier to the financial institution. The financial institution then pays the supplier on the invoice due date under our agreement with such supplier for any invoices not previously sold by the supplier to the financial institution. Amounts due to a supplier that elects to participate in this SCF program are included in accounts payable in our Condensed Consolidated Balance Sheet, and the associated payments are reflected in net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows. Separate from this SCF program, we and suppliers who participate in this SCF program generally maintain the contractual right to require the other party to negotiate in good faith the existing payment terms as a result of changes in market conditions, including changes in interest rates and general market liquidity, or in some cases for any reason. Outstanding trade accounts payables subject to this SCF program were approximately $251.0 million, $321.9 million and $330.2 million at June 30, 2024 and 2023 and December 31, 2023, respectively.

Previous wording

The following summarized financial information relates to the Obligor Group as of March 31, 2024 and December 31, 2023 and for the three months ended March 31, 2024. 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 $1.6 billion as of March 31, 2024 and December 31, 2023 are not included in noncurrent assets in the table below.

Current wording

The following summarized financial information relates to the Obligor Group as of June 30, 2024 and December 31, 2023 and for the six months ended June 30, 2024. 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 $1.6 billion as of June 30, 2024 and December 31, 2023 are not included in noncurrent assets in the table below.

Previous wording

At March 31, 2024 and December 31, 2023, the Obligor Group held current receivables due from other subsidiary companies of $23.8 million and $35.6 million, respectively; long-term notes receivable due from other subsidiary companies of

Current wording

At June 30, 2024 and December 31, 2023, the Obligor Group held current receivables due from other subsidiary companies of $33.4 million and $35.6 million, respectively; long-term notes receivable due from other subsidiary companies of $725.4 million and $748.8 million, respectively; and current payables due to other subsidiary companies of $16.2 million and $10.9 million, respectively.

Previous wording

For the three months ended March 31, 2024, net income in the table above excludes income from equity method investments of other subsidiary companies of $21.3 million. For the three months ended March 31, 2024, the Obligor Group recorded the following transactions with other subsidiary companies: sales to such other subsidiary companies of $14.2 million; net credits from such other subsidiary companies of $6.7 million; and net interest income from such other subsidiary companies of $9.5 million. For the three months ended March 31, 2024, the Obligor Group did not receive dividends from other subsidiary companies.

Current wording

For the six months ended June 30, 2024, net income in the table above excludes income from equity method investments of other subsidiary companies of $52.0 million. For the six months ended June 30, 2024, the Obligor Group recorded the following transactions with other subsidiary companies: sales to such other subsidiary companies of $28.1 million; net credits from such other subsidiary companies of $13.6 million; and net interest income from such other subsidiary companies of $18.8 million. For the six months ended June 30, 2024, the Obligor Group did not receive dividends from other subsidiary companies.

Previous wording

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 $11.8 million and $5.1 million for the three months ended March 31, 2024 and 2023, respectively. Excluding the impact of our withdrawal from the Central States Pension Plan in 2019, remaining expenses and cash expenditures for our rationalization plans are expected to be $8.1 million and $14.3 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 $0.8 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 $2.6 million annually through 2040.

Current wording

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 $21.1 million and $8.9 million for the six months ended June 30, 2024 and 2023, respectively. Excluding the impact of our withdrawal from the Central States Pension Plan in 2019, remaining expenses and cash expenditures for our rationalization plans are expected to be $5.1 million and $7.9 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 $0.8 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 $2.6 million annually through 2040.

Previous wording

You should also read Note 3 to our Condensed Consolidated Financial Statements for the three months ended March 31, 2024 included elsewhere in this Quarterly Report.

Current wording

You should also read Note 3 to our Condensed Consolidated Financial Statements for the three and six months ended June 30, 2024 included elsewhere in this Quarterly Report.