SILGAN HOLDINGS INC 10-Q

Item 1. Financial Statements SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) March 31, 2024 March 31, 2023 Dec. 31, 2023 (unaudited) (unaudited) Assets Current assets: Cash and cash equivalents $ 308,641 $ 501,060 $ 642,923 Trade accounts receivable, net 946,051 936,048 599,524 Inventories 957,240 1,055,079 940,808 Prepaid expenses and other current assets 164,439 132,822 165,727 Total current assets 2,376,371 2,625,009 2,348,982 Property, plant and equipment, net 1,943,682 1,930,003 1,961,585 Goodwill 1,997,285 2,001,753 2,018,241 Other intangible assets, net 702,033 755,883 721,023 Other assets, net 554,884 549,074 561,405 $ 7,574,255 $ 7,861,722 $ 7,611,236 Liabilities and Stockholders’ Equity Current liabilities: Revolving loans and current portion of long-term debt $ 1,345,851 $ 784,795 $ 880,315 Trade accounts payable 609,832 716,487 1,075,913 Accrued payroll and related costs 100,118 101,881 97,886 Accrued liabilities 233,676 240,952 257,742 Total current liabilities 2,289,477 1,844,115 2,311,856 Long-term debt 2,534,504 3,370,346 2,546,451 Deferred income taxes 432,266 389,010 433,666 Other liabilities 418,162 476,961 429,905 Stockholders’ equity: Common stock 1,751 1,751 1,751 Paid-in capital 356,529 342,157 353,848 Retained earnings 3,242,914 3,013,104 3,208,237 Accumulated other comprehensive loss ( 271,990 ) ( 324,570 ) ( 251,361 ) Treasury stock ( 1,429,358 ) ( 1,251,152 ) ( 1,423,117 ) Total stockholders’ equity 1,899,846 1,781,290 1,889,358 $ 7,574,255 $ 7,861,722 $ 7,611,236 See accompanying notes. -3- SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the three months ended March 31, 2024 and 2023 (Dollars and shares in thousands, except per share amounts) (Unaudited) 2024 2023 Net sales $ 1,317,038 $ 1,418,281 Cost of goods sold 1,093,559 1,180,316 Gross profit 223,479 237,965 Selling, general and administrative expenses 100,476 101,330 Rationalization charges 11,691 4,121 Other pension and postretirement (income) expense ( 407 ) 1,286 Income before interest and income taxes 111,719 131,228 Interest and other debt expense 38,647 36,766 Income before income taxes 73,072 94,462 Provision for income taxes 17,908 22,433 Net income $ 55,164 $ 72,029 Earnings per share: Basic net income per share $ 0.52 $ 0.65 Diluted net income per share $ 0.52 $ 0.65 Weighted average number of shares: Basic 106,646 110,219 Effect of dilutive securities 405 630 Diluted 107,051 110,849 See accompanying notes. -4- SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the three months ended March 31, 2024 and 2023 (Dollars in thousands) (Unaudited) 2024 2023 Net income $ 55,164 $ 72,029 Other comprehensive income (loss), net of tax: Changes in net prior service credit and actuarial losses 1,403 2,306 Change in fair value of derivatives 2,425 ( 1,287 ) Foreign currency translation ( 24,457 ) 19,721 Other comprehensive (loss) income ( 20,629 ) 20,740 Comprehensive income $ 34,535 $ 92,769 See accompanying notes. -5- SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended March 31, 2024 and 2023 (Dollars in thousands) (Unaudited) 2024 2023 Cash flows provided by (used in) operating activities: Net income $ 55,164 $ 72,029 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 66,430 64,843 Amortization of debt discount and debt issuance costs 1,347 1,333 Rationalization charges 11,691 4,121 Stock compensation expense 4,115 3,681 Other changes that provided (used) cash: Trade accounts receivable, net ( 355,645 ) ( 271,224 ) Inventories ( 22,319 ) ( 279,982 ) Trade accounts payable ( 281,165 ) ( 176,147 ) Accrued liabilities ( 30,041 ) ( 49,812 ) Other, net 2,613 ( 616 ) Net cash (used in) operating activities ( 547,810 ) ( 631,774 ) Cash flows provided by (used in) investing activities: Capital expenditures ( 75,258 ) ( 67,871 ) Proceeds from asset sales 2,495 372 Other, net 301 508 Net cash (used in) investing activities ( 72,462 ) ( 66,991 ) Cash flows provided by (used in) financing activities: Borrowings under revolving loans 597,879 783,454 Repayments under revolving loans ( 15,469 ) ( 28,442 ) Repayment of principal amounts under finance leases ( 346 ) ( 658 ) Proceeds from issuance of long-term debt — 2,146 Repayments of long-term debt ( 100,000 ) ( 50,705 ) Changes in outstanding checks - principally vendors ( 160,576 ) ( 61,433 ) Dividends paid on common stock ( 21,137 ) ( 20,575 ) Repurchase of common stock ( 7,675 ) ( 13,412 ) Net cash provided by financing activities 292,676 610,375 Effect of exchange rate changes on cash and cash equivalents ( 6,686 ) 3,828 Cash and cash equivalents: Net (decrease) ( 334,282 ) ( 84,562 ) Balance at beginning of year 642,923 585,622 Balance at end of period $ 308,641 $ 501,060 Interest paid, net $ 50,290 $ 34,764 Income taxes paid, net 17,003 20,086 See accompanying notes. -6- SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the three months ended March 31, 2024 and 2023 (Dollars and shares in thousands, except per share amounts) (Unaudited) 2024 2023 Common stock - shares outstanding Balance at beginning of period 106,500 110,079 Net issuance of treasury stock for vested restricted stock units 275 266 Repurchases of common stock — ( 93 ) Balance at end of period 106,775 110,252 Common stock - par value Balance at beginning and end of period $ 1,751 $ 1,751 Paid-in capital Balance at beginning of period 353,848 339,839 Stock compensation expense 4,115 3,681 Net issuance of treasury stock for vested restricted stock units ( 1,434 ) ( 1,363 ) Balance at end of period 356,529 342,157 Retained earnings Balance at beginning of period 3,208,237 2,961,079 Net income 55,164 72,029 Dividends declared on common stock ( 20,487 ) ( 20,004 ) Balance at end of period 3,242,914 3,013,104 Accumulated other comprehensive loss Balance at beginning of period ( 251,361 ) ( 345,310 ) Other comprehensive (loss) income ( 20,629 ) 20,740 Balance at end of period ( 271,990 ) ( 324,570 ) Treasury stock Balance at beginning of period ( 1,423,117 ) ( 1,239,103 ) Net issuance of treasury stock for vested restricted stock units ( 6,241 ) ( 7,249 ) Repurchases of common stock — ( 4,800 ) Balance at end of period ( 1,429,358 ) ( 1,251,152 ) Total stockholders’ equity $ 1,899,846 $ 1,781,290 Dividends declared on common stock per share $ 0.19 $ 0.18 See accompanying notes. -7- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 2024 and 2023 and for the three 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, 2023 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, 2023. Certain prior year amounts have been reclassified to confirm with the current year's presentation. 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 for the three months ended March 31 were as follows: 2024 2023 (Dollars in thousands) Dispensing and Specialty Closures $ 535,920 $ 579,932 Metal Containers 617,129 670,096 Custom Containers 163,989 168,253 $ 1,317,038 $ 1,418,281 Revenues by geography for the three months ended March 31 were as follows: 2024 2023 (Dollars in thousands) North America $ 981,963 $ 1,056,526 Europe and other 335,075 361,755 $ 1,317,038 $ 1,418,281 Our contract assets primarily consist of unbilled accounts receivable related to over time revenue recognition and were $ 97.2 million, $ 108.5 million, and $ 100.0 million as of March 31, 2024 and 2023 and December 31, 2023, 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 March 31, 2024 and 2023 and for the three months then ended is unaudited) Note 3. 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 for the three months ended March 31 were as follows: 2024 2023 (Dollars in thousands) Dispensing and Specialty Closures $ 6,557 $ 114 Metal Containers 3,584 3,903 Custom Containers 1,550 104 $ 11,691 $ 4,121 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, 2023 $ 33,555 $ 465 $ — $ 34,020 Charged to expense 4,088 7,255 348 11,691 Utilized and currency translation ( 4,229 ) ( 7,555 ) ( 348 ) ( 12,132 ) Balance at March 31, 2024 $ 33,414 $ 165 $ — $ 33,579 Rationalization reserves as of March 31, 2024 were recorded in our Condensed Consolidated Balance Sheet as accrued liabilities of $ 7.2 million and other liabilities of $ 26.4 million. Excluding the impact of our withdrawal from the Central States, Southeast and Southwest Areas Pension Plan, or 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. -9- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 2024 and 2023 and for the three 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, 2023 $ ( 133,523 ) $ ( 216 ) $ ( 117,622 ) $ ( 251,361 ) Other comprehensive loss before reclassifications — 2,884 ( 24,457 ) ( 21,573 ) Amounts reclassified from accumulated other comprehensive loss 1,403 ( 459 ) — 944 Other comprehensive loss 1,403 2,425 ( 24,457 ) ( 20,629 ) Balance at March 31, 2024 $ ( 132,120 ) $ 2,209 $ ( 142,079 ) $ ( 271,990 ) The amounts reclassified to earnings from the unrecognized net defined benefit plan costs component of accumulated other comprehensive loss for the three months ended March 31, 2024 were net (losses) of $( 1.8 ) million, excluding income tax benefits of $ 0.4 million. For the three months ended March 31, 2024, these net (losses) consisted primarily of amortization of net actuarial (losses) of $( 1.8 ) million. Amortization of net actuarial losses and net prior service cost was recorded in other pension and postretirement income in our Condensed Consolidated Statements of Income. See Note 10 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 months ended March 31, 2024 were not significant. Other comprehensive loss before reclassifications related to foreign currency translation for the three months ended March 31, 2024 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 $( 33.5 ) million, (ii) foreign currency gains related to intra-entity foreign currency transactions that are of a long-term investment nature of $ 0.1 million, and (iii) foreign currency gains related to our net investment hedges of $ 11.6 million, excluding an income tax (provision) of $( 2.7 ) million. See Note 7 for further discussion. -10- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 2024 and 2023 and for the three months then ended is unaudited) Note 5. Inventories Inventories consisted of the following: March 31, 2024 March 31, 2023 Dec. 31, 2023 (Dollars in thousands) Raw materials $ 395,261 $ 498,580 $ 465,375 Work-in-process 209,296 254,373 219,462 Finished goods 652,724 630,233 556,737 Other 17,341 16,205 16,616 1,274,622 1,399,391 1,258,190 Adjustment to value inventory at cost on the LIFO method ( 317,382 ) ( 344,312 ) ( 317,382 ) $ 957,240 $ 1,055,079 $ 940,808 Note 6. Long-Term Debt Long-term debt consisted of the following: March 31, 2024 March 31, 2023 Dec. 31, 2023 (Dollars in thousands) Bank debt Bank revolving loans $ 580,000 $ 755,000 $ — U.S. term loans 850,000 950,000 950,000 Other foreign bank revolving and term loans 57,435 51,840 56,243 Total bank debt 1,487,435 1,756,840 1,006,243 3¼% Senior Notes 702,000 706,160 717,990 4⅛% Senior Notes 600,000 600,000 600,000 2¼% Senior Notes 540,000 543,200 552,300 1.4 % Senior Secured Notes 500,000 500,000 500,000 Finance leases 62,905 65,050 63,302 Total debt - principal 3,892,340 4,171,250 3,439,835 Less unamortized debt issuance costs and debt discount 11,985 16,109 13,069 Total debt 3,880,355 4,155,141 3,426,766 Less current portion 1,345,851 784,795 880,315 $ 2,534,504 $ 3,370,346 $ 2,546,451 At March 31, 2024, the current portion of long-term debt consisted of $ 702.0 million of 3¼% Senior Notes due 2025, $ 580.0 million of U.S. revolving loans under our amended and restated senior secured credit facility, as amended, or the Credit Agreement, $ 36.3 million of other foreign bank revolving and term loans and $ 27.6 million of finance leases. -11- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 2024 and 2023 and for the three 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 March 31, 2024: Carrying Amount Fair Value (Dollars in thousands) Assets: Cash and cash equivalents $ 308,641 $ 308,641 Liabilities: Bank debt $ 1,487,435 $ 1,487,435 3¼% Senior Notes 702,000 695,415 4⅛% Senior Notes 599,469 567,708 2¼% Senior Notes 540,000 493,063 1.4 % Senior Secured Notes 499,889 457,980 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 March 31, 2024 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, 3¼% Senior Notes, 4⅛% Senior Notes, 2¼% Senior Notes and 1.4 % Senior Secured 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 3¼% Senior Notes, 4⅛% Senior Notes, 2¼% Senior Notes and 1.4 % Senior Secured 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. -12- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 2024 and 2023 and for the three months then ended is unaudited) We utilize certain derivative financial instruments to manage a portion of our interest rate and natural gas cost exposures. We generally limit our use of derivative financial instruments to interest 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 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. 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 In March 2023, we entered into four U.S. dollar interest rate swap agreements, each for $ 75.0 million notional principal amount, to manage a portion of our exposure to interest rate fluctuations. These agreements have a fixed rate ranging from 3.889 percent to 3.905 percent, mature on April 3, 2026, and were entered into with financial institutions which are expected to fully perform under the terms thereof. 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 months ended March 31, 2024. The total fair value of our interest rate swaps agreements in effect at March 31, 2024 was not significant. Natural Gas Swap Agreements We have entered into natural gas swap agreements to manage a portion of our exposure to fluctuations in natural gas prices. The difference between amounts to be paid or received on our natural gas swap agreements is recorded in cost of goods sold in our Condensed Consolidated Statements of Income and was not significant for the three months ended March 31, 2024. These agreements are with a financial institution which is expected to fully perform under the terms thereof. The total fair value of our natural gas swap agreements in effect at March 31, 2024 was not significant. Foreign Currency Exchange Rate Risk In an effort to minimize our foreign currency exchange rate risk, we have financed acquisitions of foreign operations primarily with borrowings denominated in Euros. 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% Senior Notes which are Euro denominated. Foreign currency gains related to our net investment hedges included in accumulated other comprehensive loss for the three months ended March 31, 2024 were $ 11.6 million. -13- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 2024 and 2023 and for the three months then ended is unaudited) Note 8. Commitments and Contingencies 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. Supply Chain Finance Program We have a supply chain finance (“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. Once a qualifying supplier elects to participate in this SCF program, all of our payments to the participating supplier are paid to such financial institution in this SCF program on the invoice due date under our agreement with such supplier, regardless of whether the individual invoice was sold by the supplier to such financial institution. We may terminate our agreement with the financial institution upon at least 30 days’ notice, and the financial institution may terminate our agreement upon at least 10 days’ notice. Additionally, suppliers who elect to participate in this SCF program may terminate their participation upon at least 30 days’ notice. The suppliers' invoices sold under this SCF program can be outstanding up to 210 days from the invoice date. Suppliers’ invoices included in this SCF program were $ 252.6 million, $ 318.4 million and $ 330.2 million at March 31, 2024 and 2023 and December 31, 2023, respectively, and were included in accounts payable in our Condensed Consolidated Balance Sheets. Note 10. Retirement Benefits The components of the net periodic pension benefit cost for the three months ended March 31 were as follows: 2024 2023 (Dollars in thousands) Service cost $ 2,165 $ 2,229 Interest cost 8,413 8,709 Expected return on plan assets ( 10,771 ) ( 10,189 ) Amortization of prior service cost 23 28 Amortization of actuarial losses 1,852 2,945 Net periodic benefit cost $ 1,682 $ 3,722 The components of the net periodic other postretirement benefit cost (credit) for the three months ended March 31 were as follows: 2024 2023 (Dollars in thousands) Service cost $ 7 $ 14 Interest cost 165 189 Amortization of prior service credit ( 5 ) ( 235 ) Amortization of actuarial gains ( 84 ) ( 161 ) Net periodic benefit cost (credit) $ 83 $ ( 193 ) -14- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 2024 and 2023 and for the three months then ended is unaudited) Note 11. 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 2022 tax year with no change to our filed federal income tax return. We have been accepted into the Compliance Assurance Program for the 2023 and 2024 tax years which provides for the review by the IRS of tax matters relating to our tax return prior to filing. Note 12. Treasury Stock On March 4, 2022, 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, 2026. We did not repurchase any shares of our common stock pursuant to this authorization during the three months ended March 31, 2024. At March 31, 2024, we had approximately $ 93.3 million remaining under this authorization for the repurchase of our common stock. During the first three months of 2024, we issued 449,998 treasury shares which had an average cost of $ 3.19 per share for restricted stock units that vested during the period that had been previously issued under our stock-based compensation plans. In accordance with the applicable agreements for such restricted stock units, we repurchased 174,819 shares of our common stock at an average cost of $ 43.91 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 March 31, 2024, 68,337,362 shares of our common stock were held in treasury. Note 13. Stock-Based Compensation We currently have one stock-based compensation plan in effect under which we have issued restricted stock units to our officers, other key employees and outside directors. During the first three months of 2024, 460,600 restricted stock units were granted to certain of our officers and other key employees. The fair value of these restricted stock units at the grant date was $ 20.2 million, which is being amortized ratably over the respective vesting period from the grant date. -15- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 2024 and 2023 and for the three months then ended is unaudited) Note 14. Segment Information We evaluate performance of our business segments and allocate resources based on the adjusted EBIT of our business segments. Adjusted EBIT is not a defined term under GAAP. We define adjusted EBIT as income before interest and income taxes excluding acquired intangible asset amortization expense, other pension (income) expense for U.S. pension plans and rationalization charges. Adjusted EBIT should not be considered in isolation or as a substitute for income before interest and income taxes or any other financial data prepared in accordance with GAAP and may not be comparable to calculations of similarly titled measures by other companies. Reportable segment information for the three months ended March 31 was as follows: Dispensing and Specialty Closures Metal Containers Custom Containers Corporate Total (Dollars in thousands) Three months ended March 31, 2024 Net sales $ 535,920 $ 617,129 $ 163,989 $ — $ 1,317,038 Income before interest and income taxes 59,760 41,665 17,786 ( 7,492 ) 111,719 Adjusted EBIT 77,850 44,954 20,168 ( 7,492 ) 135,480 Depreciation 25,151 18,913 9,064 21 53,149 Three months ended March 31, 2023 Net sales $ 579,932 $ 670,096 $ 168,253 $ — $ 1,418,281 Income before interest and income taxes 70,946 47,797 18,451 ( 5,966 ) 131,228 Adjusted EBIT 82,936 52,400 20,034 ( 5,966 ) 149,404 Depreciation 24,759 17,988 8,835 40 51,622 -16- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 2024 and 2023 and for the three months then ended is unaudited) Total adjusted EBIT is reconciled to income before income taxes for the three months ended March 31 as follows: 2024 2023 (Dollars in thousands) Total adjusted EBIT $ 135,480 $ 149,404 Less: Acquired intangible asset amortization expense 13,281 13,221 Other pension (income) expense for U.S. pension plans ( 1,211 ) 834 Rationalization charges 11,691 4,121 Income before interest and income taxes 111,719 131,228 Less interest and other debt expense 38,647 36,766 Income before income taxes $ 73,072 $ 94,462 Net sales and adjusted EBIT of our metal containers segment and of part of our dispensing and specialty closures segment are dependent, in part, upon the vegetable and fruit harvests in the United States and, to a lesser extent, in a variety of national growing regions in Europe. 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 experienced higher unit sales volume in the third quarter of our fiscal year and generated a disproportionate amount of our annual adjusted EBIT during that quarter. -17-