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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 September 30, 2021
OR
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)
Delaware06-1269834
(State or other jurisdiction(I.R.S. Employer
of incorporation or organization)Identification No.)
  
4 Landmark Square 
Stamford,Connecticut06901
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareSLGNNasdaq 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 October 31, 2021, the number of shares outstanding of the Registrant’s common stock was 110,410,229.
-1-


SILGAN HOLDINGS INC.
 
TABLE OF CONTENTS
  
 Page No.
  
  
  
  
 
  
  
  
  
  
 
  
 
 
  

-2-



Part I. Financial Information
Item 1. Financial Statements

SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Sept. 30, 2021Sept. 30, 2020Dec. 31, 2020
 (unaudited)(unaudited) 
Assets   
Current assets:   
Cash and cash equivalents$270,567 $193,759 $409,481 
Trade accounts receivable, net1,033,680 865,436 619,535 
Inventories762,182 678,181 677,534 
Prepaid expenses and other current assets114,945 84,715 92,643 
Total current assets2,181,374 1,822,091 1,799,193 
Property, plant and equipment, net1,963,349 1,785,787 1,840,758 
Goodwill2,039,033 1,702,463 1,741,496 
Other intangible assets, net839,332 633,256 637,208 
Other assets, net524,752 508,982 492,931 
 $7,547,840 $6,452,579 $6,511,586 
Liabilities and Stockholders’ Equity   
Current liabilities:   
Revolving loans and current portion of long-term debt$934,246 $284,465 $28,036 
Trade accounts payable761,018 592,881 802,541 
Accrued payroll and related costs110,452 119,369 130,088 
Accrued liabilities235,372 245,626 230,955 
Total current liabilities2,041,088 1,242,341 1,191,620 
Long-term debt3,191,581 3,163,305 3,223,217 
Deferred income taxes383,154 371,966 355,995 
Other liabilities475,311 456,104 487,881 
Stockholders’ equity:   
Common stock1,751 1,751 1,751 
Paid-in capital320,132 301,463 306,363 
Retained earnings2,622,401 2,348,728 2,395,395 
Accumulated other comprehensive loss(291,158)(272,352)(260,953)
Treasury stock(1,196,420)(1,160,727)(1,189,683)
Total stockholders’ equity1,456,706 1,218,863 1,252,873 
 $7,547,840 $6,452,579 $6,511,586 

See accompanying notes.
-3-


SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three and nine months ended September 30, 2021 and 2020
(Dollars and shares in thousands, except per share amounts)
(Unaudited)

Three Months EndedNine Months Ended
 Sept. 30, 2021Sept. 30, 2020Sept. 30, 2021Sept. 30, 2020
   
Net sales$1,651,070 $1,488,499 $4,237,841 $3,695,353 
Cost of goods sold1,402,836 1,230,148 3,533,257 3,027,809 
Gross profit248,234 258,351 704,584 667,544 
Selling, general and administrative expenses90,299 91,525 282,072 282,011 
Rationalization charges2,315 2,505 13,026 7,247 
Other pension and postretirement income(12,297)(9,712)(37,934)(29,122)
Income before interest and income taxes167,917 174,033 447,420 407,408 
Interest and other debt expense before loss on
    early extinguishment of debt
27,039 27,725 79,868 77,051 
Loss on early extinguishment of debt
  883 1,481 
Interest and other debt expense27,039 27,725 80,751 78,532 
Income before income taxes140,878 146,308 366,669 328,876 
Provision for income taxes34,586 33,457 92,620 80,253 
Net income$106,292 $112,851 $274,049 $248,623 
Earnings per share:
Basic net income per share$0.96 $1.02 $2.48 $2.24 
Diluted net income per share$0.96 $1.01 $2.47 $2.23 
Weighted average number of shares:
Basic110,465 110,921 110,372 110,895 
Effect of dilutive securities732 691 739 565 
Diluted111,197 111,612 111,111 111,460 
See accompanying notes.

-4-


 SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three and nine months ended September 30, 2021 and 2020
(Dollars in thousands)
(Unaudited)

Three Months EndedNine Months Ended
 Sept. 30, 2021Sept. 30, 2020Sept. 30, 2021Sept. 30, 2020
Net income$106,292 $112,851 $274,049 $248,623 
  Other comprehensive income (loss), net of tax:
  Changes in net prior service credit and actuarial losses2,156 1,807 5,910 4,555 
  Change in fair value of derivatives1,071 681 2,540 (1,670)
  Foreign currency translation(30,952)22,520 (38,655)(15,495)
Other comprehensive (loss) income(27,725)25,008 (30,205)(12,610)
Comprehensive income $78,567 $137,859 $243,844 $236,013 
 
See accompanying notes.
-5-


 SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2021 and 2020
(Dollars in thousands)
(Unaudited)


 20212020
Cash flows provided by (used in) operating activities:  
Net income$274,049 $248,623 
Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
  
Depreciation and amortization185,968 163,454 
Rationalization charges13,026 7,247 
Stock compensation expense15,605 13,880 
Loss on early extinguishment of debt883 1,481 
Other changes that provided (used) cash, net of effects from acquisitions:  
Trade accounts receivable, net(415,331)(311,008)
Inventories(78,738)2,435 
Trade accounts payable62,303 (73,814)
Accrued liabilities(33,488)57,187 
Other, net(30,055)8,981 
Net cash (used in) provided by operating activities(5,778)118,466 
Cash flows provided by (used in) investing activities:  
Purchase of businesses, net of cash acquired(718,430)(940,875)
Capital expenditures(172,994)(165,163)
Other, net2,234 999 
Net cash used in investing activities(889,190)(1,105,039)
Cash flows provided by (used in) financing activities:  
Borrowings under revolving loans1,155,199 993,406 
Repayments under revolving loans(248,310)(748,539)
Proceeds from issuance of long-term debt499,725 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(47,030)(40,432)
Debt issuance costs(4,909)(10,265)
Repurchase of common stock(8,573)(13,155)
Net cash provided by financing activities761,886 975,500 
Effect of exchange rate changes on cash and cash equivalents(5,832)1,008 
Cash and cash equivalents:  
Net decrease(138,914)(10,065)
Balance at beginning of year409,481 203,824 
Balance at end of period$270,567 $193,759 
Interest paid, net$79,107 $70,948 
Income taxes paid, net79,812 91,378 

See accompanying notes.
-6-


SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the three and nine months ended September 30, 2021 and 2020
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
 

Three Months EndedNine Months Ended
Sept. 30, 2021Sept. 30, 2020Sept. 30, 2021Sept. 30, 2020
Common stock - shares outstanding
Balance at beginning of period
110,408 110,886 110,057 110,780 
Net issuance of treasury stock for vested restricted stock units2  353 365 
Repurchases of common stock
   (259)
Balance at end of period
110,410 110,886 110,410 110,886 
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
314,873 296,639 306,363 289,422 
Stock compensation expense
5,268 4,824 15,605 13,880 
Net issuance of treasury stock for vested restricted stock units(9) (1,836)(1,839)
Balance at end of period
320,132 301,463 320,132 301,463 
Retained earnings
Balance at beginning of period
2,531,783 2,249,391 2,395,395 2,141,302 
Net income
106,292 112,851 274,049 248,623 
Dividends declared on common stock
(15,674)(13,514)(47,043)(40,532)
Adoption of accounting standards update related to credit losses in 2020— — — (665)
Balance at end of period
2,622,401 2,348,728 2,622,401 2,348,728 
Accumulated other comprehensive loss
Balance at beginning of period
(263,433)(297,360)(260,953)(259,742)
Other comprehensive (loss) income (27,725)25,008 (30,205)(12,610)
Balance at end of period
(291,158)(272,352)(291,158)(272,352)
Treasury stock
Balance at beginning of period
(1,196,394)(1,160,727)(1,189,683)(1,149,411)
Net issuance of treasury stock for vested restricted stock units(26) (6,737)(4,382)
Repurchases of common stock
   (6,934)
Balance at end of period
(1,196,420)(1,160,727)(1,196,420)(1,160,727)
Total stockholders' equity$1,456,706 $1,218,863 $1,456,706 $1,218,863 
Dividends declared on common stock per share$0.14 $0.12 $0.42 $0.36 

See accompanying notes.
-7-


SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2021 and 2020 and for the
three and nine 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.

Goodwill and Other Intangible Assets. We review goodwill and other indefinite-lived intangible assets for impairment as of July 1 of each year and more frequently if circumstances indicate a possible impairment. We determined that our goodwill and other indefinite-lived intangible assets were not impaired in our annual 2021 assessment performed during the third quarter.


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 EndedNine Months Ended
Sept. 30, 2021Sept. 30, 2020Sept. 30, 2021Sept. 30, 2020
(Dollars in thousands)
Dispensing and Specialty Closures$533,329 $475,105 $1,588,449 $1,242,725 
Metal Containers942,125 856,660 2,120,740 1,962,370 
Custom Containers175,616 156,734 528,652 490,258 
$1,651,070 $1,488,499 $4,237,841 $3,695,353 

Revenues by geography were as follows:
Three Months EndedNine Months Ended
Sept. 30, 2021Sept. 30, 2020Sept. 30, 2021Sept. 30, 2020
(Dollars in thousands)
North America$1,274,025 $1,143,562 $3,140,924 $2,858,561 
Europe and other377,045 344,937 1,096,917 836,792 
$1,651,070 $1,488,499 $4,237,841 $3,695,353 

-8-


SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2021 and 2020 and for the
three and nine months then ended is unaudited)
Our contract assets primarily consist of unbilled accounts receivable related to over time revenue recognition and were $94.6 million, $80.2 million, and $83.0 million as of September 30, 2021 and 2020 and December 31, 2020, respectively. Unbilled receivables are included in trade accounts receivable, net on our Condensed Consolidated Balance Sheets.


Note 3.               Acquisitions

Gateway Plastics Acquisition

On September 20, 2021, we acquired Gateway Plastics LLC, or Silgan Specialty Packaging, a manufacturer and seller of dispensing closures and integrated dispensing packaging solutions, such as a combined container and closure or 100% recyclable dispensing beverage pods, to consumer goods product companies primarily for the food and beverage markets. The purchase price for this acquisition of $483.8 million, net of cash acquired, was funded with revolving loan borrowings under our amended and restated senior secured credit facility, as amended, or the Credit Agreement. The purchase price is subject to adjustments for working capital, net indebtedness and seller's transaction expenses. The initial purchase price has been allocated to assets acquired and liabilities assumed based on estimated fair values at the date of acquisition using valuation techniques including the income, cost and market approaches, primarily using Level 3 inputs (as defined in Note 9). For this acquisition, we applied the acquisition method of accounting and recognized assets acquired and liabilities assumed at fair value as of the acquisition date, and we recognized goodwill of $200.7 million which is expected to be deductible for income tax purposes, a customer relationship intangible asset of $166.0 million with an estimated remaining life of 22 years and technology know-how of $3.4 million with an estimated remaining life of 5 years. The purchase price allocation is preliminary and subject to change pending a final valuation of the assets and liabilities, including property, plant and equipment and intangible assets. Silgan Specialty Packaging's results of operations were included in our Dispensing and Specialty Closures segment since the acquisition date and were not significant since such date.

Unicep Packaging Acquisition

On September 30, 2021, we acquired Unicep Packaging LLC, or Unicep, a Specialty Contract Manufacturer and Developer, or SCMD, solutions provider that develops, formulates, manufactures and sells precision dosing dispensing packaging solutions, such as diagnostic test components, oral care applications and skin care products, primarily for the health care, diagnostics, animal health, oral care and personal care markets. The purchase price for this acquisition of $236.9 million, net of cash acquired, was funded with revolving loan borrowings under the Credit Agreement. The purchase price is subject to adjustments for working capital, net indebtedness and seller's transaction expenses. The initial purchase price has been allocated to assets acquired and liabilities assumed based on estimated fair values at the date of acquisition using valuation techniques including the income, cost and market approaches, primarily using Level 3 inputs (as defined in Note 9). For this acquisition, we applied the acquisition method of accounting and recognized assets acquired and liabilities assumed at fair value as of the acquisition date, and we recognized goodwill of $142.8 million which is expected to be deductible for income tax purposes, a customer relationship intangible asset of $72.0 million with an estimated remaining life of 18 years, technology know-how of $4.0 million with an estimated remaining life of 10 years and a trade name of $3.7 million with an estimated remaining life of 10 years. The purchase price allocation is preliminary and subject to change pending a final valuation of the assets and liabilities, including property, plant and equipment and intangible assets. Unicep's results of operations were included in our Dispensing and Specialty Closures segment since the acquisition date and were not significant since such date.



-9-


SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2021 and 2020 and for the
three and nine months then ended is unaudited)
Note 4.               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. Rationalization charges by segment were as follows:
Three Months EndedNine Months Ended
Sept. 30, 2021Sept. 30, 2020Sept. 30, 2021Sept. 30, 2020
 (Dollars in thousands)
Dispensing and Specialty Closures$406 $787 $5,704 $2,229 
Metal Containers1,822 1,639 7,068 4,755 
Custom Containers87 79 254 263 
 $2,315 $2,505 $13,026 $7,247 



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 expense7,262 1,210 4,554 13,026 
Utilized and currency translation(5,253)(1,638)(4,554)(11,445)
Balance at September 30, 2021$43,014 $127 $ $43,141 

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 9 for information regarding a Level 3 fair value measurement).

Rationalization reserves as of September 30, 2021 were recorded in our Condensed Consolidated Balance Sheet as accrued liabilities of $7.1 million and other liabilities of $36.0 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 $1.2 million and $5.9 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 $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.



-10-


SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2021 and 2020 and for the
three and nine months then ended is unaudited)
Note 5.               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
 1,022 (38,655)(37,633)
Amounts reclassified from accumulated other
    comprehensive loss
5,910 1,518  7,428 
 Other comprehensive loss5,910 2,540 (38,655)(30,205)
Balance at September 30, 2021$(162,694)$(2,116)$(126,348)$(291,158)
 
The amounts reclassified to earnings from the unrecognized net defined benefit plan costs component of accumulated other comprehensive loss for the three and nine months ended September 30, 2021 were net (losses) of $(2.9) million and $(8.1) million, respectively, excluding income tax benefits of $0.8 million and $2.2 million, respectively. For the three and nine months ended September 30, 2021, these net (losses) consisted of amortization of net actuarial (losses) of $(3.3) million and $(9.3) million and amortization of net prior service credit of $0.4 million and $1.2 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 11 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 nine months ended September 30, 2021 were not significant.

Other comprehensive loss before reclassifications related to foreign currency translation for the three and nine months ended September 30, 2021 consisted of (i) foreign currency (losses) related to translation of quarter end financial statements of foreign subsidiaries utilizing a functional currency other than the U.S. dollar of $(40.5) million and $(63.1) million, respectively, (ii) foreign currency (losses) gains related to intra-entity foreign currency transactions that are of a long-term investment nature of $(0.1) million and $0.8 million, respectively, and (iii) foreign currency gains related to our net investment hedges of $12.6 million and $30.9 million, respectively, excluding an income tax (provision) of $(3.0) million and $(7.3) million, respectively. See Note 9 for further discussion.


Note 6.               Inventories

Inventories consisted of the following: 
Sept. 30, 2021Sept. 30, 2020Dec. 31, 2020
 (Dollars in thousands)
Raw materials$333,202 $294,896 $270,066 
Work-in-process152,429 154,157 167,100 
Finished goods370,134 370,406 335,346 
Other16,005 15,217 14,610 
 871,770 834,676 787,122 
Adjustment to value inventory at cost on the LIFO method(109,588)(156,495)(109,588)
 $762,182 $678,181 $677,534 

-11-


SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2021 and 2020 and for the
three and nine months then ended is unaudited)

Note 7.               Goodwill and Other Intangibles

Changes in the carrying amount of goodwill were as follows:

Dispensing and Specialty ClosuresMetal ContainersCustom
Containers
Total
(Dollars in thousands)
Balance at December 31, 2020$1,396,191 $117,938 $227,367 $1,741,496 
Acquisitions346,916 — — 346,916 
Currency translation(46,610)(2,869)100 (49,379)
Balance at September 30, 2021$1,696,497 $115,069 $227,467 $2,039,033 
In connection with our acquisitions of Silgan Specialty Packaging and Unicep as discussed in Note 3, we recognized goodwill of $343.5 million.


The components of other intangible assets, net were as follows:
Sept. 30, 2021Dec. 31, 2020
Gross AmountAccumulated AmortizationGross AmountAccumulated Amortization
(Dollars in thousands)
Definite-lived intangibles:
Customer relationships$926,566 $(163,998)$711,065 $(147,014)
Other81,339 (36,715)72,689 (31,672)
1,007,905 (200,713)783,754 (178,686)
Indefinite-lived intangibles:
Trade names32,140 — 32,140 — 
$1,040,045 $(200,713)$815,894 $(178,686)
In connection with our acquisitions of Silgan Specialty Packaging and Unicep as discussed in Note 3, we recognized intangible assets for customer relationships of $238.0 million, technology know-how of $7.4 million and a trade name of $3.7 million.

Amortization expense was $10.5 million and $31.1 million for the three and nine months ended September 30, 2021, respectively, and $10.4 million and $25.4 million for the three and nine months ended September 30, 2020, respectively. Amortization expense is expected to be $45.1 million, $52.8 million, $52.7 million, $52.7 million and $48.7 million for the years ended December 31, 2021 through 2025, respectively.



-12-


SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2021 and 2020 and for the
three and nine months then ended is unaudited)
Note 8.               Long-Term Debt

Long-term debt consisted of the following: 
Sept. 30, 2021Sept. 30, 2020Dec. 31, 2020
 (Dollars in thousands)
Bank debt   
Bank revolving loans$910,000 $246,000 $ 
U.S. term loans400,000 900,000 900,000 
Other foreign bank revolving and term loans36,003 39,825 30,407 
Total bank debt1,346,003 1,185,825 930,407 
4¾% Senior Notes
300,000 300,000 300,000 
3¼% Senior Notes
753,285 762,223 795,307 
4⅛% Senior Notes600,000 600,000 600,000 
2¼% Senior Notes579,450 586,325 611,775 
1.4% Senior Secured Notes500,000   
Finance leases69,061 35,035 34,480 
Total debt - principal4,147,799 3,469,408 3,271,969 
Less unamortized debt issuance costs and debt discount21,972 21,638 20,716 
Total debt4,125,827 3,447,770 3,251,253 
Less current portion934,246 284,465 28,036 
 $3,191,581 $3,163,305 $3,223,217 


At September 30, 2021, the current portion of long-term debt consisted of $910.0 million of bank revolving loans under the Credit Agreement, $21.6 million of other foreign bank revolving and term loans and $2.6 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
-13-


SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2021 and 2020 and for the
three and nine 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.



-14-


SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2021 and 2020 and for the
three and nine months then ended is unaudited)
Note 9.               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 September 30, 2021:

Carrying
Amount
Fair
Value
 (Dollars in thousands)
Assets:  
Cash and cash equivalents$270,567 $270,567 
Liabilities:  
Bank debt$1,346,003 $1,346,003 
4¾% Notes300,000 304,140 
3¼% Notes753,285 760,291 
4⅛% Notes599,172 616,500 
2¼% Notes579,450 584,607 
1.4% Notes499,758 492,000 

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 September 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.

-15-


SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2021 and 2020 and for the
three and nine 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 September 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 nine months ended September 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 September 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 gains related to our net investment hedges included in accumulated other comprehensive loss for the three and nine months ended September 30, 2021 were $12.6 million and $30.9 million, respectively.


Note 10.               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.



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SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2021 and 2020 and for the
three and nine months then ended is unaudited)
Note 11.               Retirement Benefits

The components of the net periodic pension benefit credit were as follows:
Three Months EndedNine Months Ended
Sept. 30, 2021Sept. 30, 2020Sept. 30, 2021Sept. 30, 2020
 (Dollars in thousands)
Service cost$3,177 $2,983 $10,754 $9,958 
Interest cost4,579 5,816 13,288 17,236 
Expected return on plan assets(19,892)(18,104)(59,590)(54,091)
Amortization of prior service cost 67 43 183 154 
Amortization of actuarial losses3,464 2,993 9,518 8,862 
Net periodic benefit credit $(8,605)$(6,269)$(25,847)$(17,881)
 
The components of the net periodic other postretirement benefit credit were as follows:
Three Months EndedNine Months Ended
Sept. 30, 2021Sept. 30, 2020Sept. 30, 2021Sept. 30, 2020
(Dollars in thousands)
Service cost$25 $18 $81 $66 
Interest cost82 142 272 425 
Amortization of prior service credit(460)(487)(1,373)(1,454)
Amortization of actuarial gains(137)(115)(232)(254)
Net periodic benefit credit$(490)$(442)$(1,252)$(1,217)


Note 12.               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.


Note 13.               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 nine months ended September 30, 2021. At September 30, 2021, we had approximately $76.6 million remaining under this authorization for the repurchase of our common stock.

During the first nine months of 2021, we issued 576,232 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 223,030 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 September 30, 2021, 64,702,267 shares of our common stock were held in treasury.



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SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2021 and 2020 and for the
three and nine months then ended is unaudited)
Note 14.             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 nine months of 2021, 364,769 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 $14.1 million, which is being amortized ratably over the respective vesting period from the grant date.


Note 15.             Segment Information

Reportable segment information was as follows:
Dispensing and Specialty ClosuresMetal
Containers
Custom
Containers
CorporateTotal
 (Dollars in thousands)
Three Months Ended September 30, 2021     
Net sales$533,329 $942,125 $175,616 $ $1,651,070 
Depreciation and amortization(1)
30,830 21,231 10,072 38 62,171 
Rationalization charges406 1,822 87  2,315 
Segment income 60,090