What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-08 · 83 added, 46 removed, 156 unchanged (45% of the section changed)

13 unchanged sentences

RESULTS OF OPERATIONS

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

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

Three Months Ended Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Dispensing and Specialty Closures 40.9 % 39.3 % 40.8 % 40.1 %

12 unchanged sentences

Net income 5.5 % 5.5 % 4.9 % 5.3 %

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

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

Three Months Ended Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(dollars in millions)

9 unchanged sentences

Consolidated $ 141.8 $ 144.0 $ 253.6 $ 275.2

Three Months Ended March 31, 2024 Compared with Three Months Ended March 31, 2023

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.

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.

In the first six months of 2024, consolidated net sales were $2.7 billion, a decrease of $146.6 million, or 5.2 percent, as compared to the first six months 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, lower volumes in the dispensing and specialty closures and metal containers segments and a less favorable mix of products sold in the custom containers segment.

These decreases were partially offset by a more favorable mix of products sold in the dispensing and specialty closures and metal containers segments, higher volumes and the pass through of higher raw material costs in the custom containers segment and the impact from favorable foreign currency translation.

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."

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."

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.

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.

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.

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.

In the first six months of 2024, income before interest and income taxes decreased by $21.6 million to $253.6 million as compared to $275.2 million in the second quarter of 2023, and margins decreased to 9.4 percent from 9.7 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, the unfavorable impact in the metal containers segment of selling higher cost metal inventory from the prior year due to lower metal costs in 2024, lower volumes in the dispensing and specialty closures and metal containers segments, higher rationalization charges and higher selling, general and administrative costs, partially offset by improved manufacturing productivity and cost performance in the dispensing and specialty closures segment, a more favorable mix of products sold in the dispensing and specialty closures and metal containers segments and higher volumes in the custom containers segment.

Rationalization charges were $18.6 million and $6.8 million in the first six months of 2024 and 2023, respectively.

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.

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.

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.

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.

Non-GAAP Measures

9 unchanged sentences

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.

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.

4 unchanged sentences

While rationalization costs are incurred on a regular basis, management views these costs more as an investment to generate savings rather than period costs.

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

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.

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

Three Months Ended Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(Dollars in millions)

21 unchanged sentences

Loss before interest and income taxes (EBIT) $ (13.9) $ (10.3) $ (21.4) $ (16.3)

Costs attributed to announced acquisitions 5.5 — 5.5 —

Adjusted EBIT $ (8.4) $ (10.3) $ (15.9) $ (16.3)

1 unchanged sentence

Dispensing and Specialty Closures Segment

Three Months Ended Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(Dollars in millions)

4 unchanged sentences

Adjusted EBIT margin 16.4 % 13.7 % 15.5 % 14.0 %

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.

In the second quarter of 2024, net sales for the dispensing and specialty closures segment increased $5.3 million, or 0.9 percent, as compared to the second quarter of 2023.

This increase was primarily the result of higher unit volumes of approximately one percent and a more favorable mix of products sold, partially offset by the pass through of lower raw material costs and the impact of unfavorable foreign currency translation of approximately $4.0 million.

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.

In the first quarter of 2024, adjusted EBIT of the dispensing and specialty closures segment decreased $5.1 million as compared to the first quarter of 2023, while adjusted EBIT margin increased to 14.5 percent from 14.3 percent over the same periods.

The decrease in adjusted EBIT was primarily due to lower unit volumes and the unfavorable impact of selling higher cost inventory from the prior year in our European metal closures operations due to lower metal costs in 2024, partially offset by improved manufacturing productivity.

In the second quarter of 2024, adjusted EBIT of the dispensing and specialty closures segment increased $15.8 million as compared to the second quarter of 2023, and adjusted EBIT margin increased to 16.4 percent from 13.7 percent over the same periods.

The increase in adjusted EBIT was primarily due to the unfavorable impact in the prior year period of higher costs related to labor challenges that limited output at a U.S.

food and beverage closures facility, a more favorable mix of products sold, higher unit volumes and improved manufacturing productivity.

In the first six months of 2024, adjusted EBIT of the dispensing and specialty closures segment increased $10.6 million as compared to the first six months of 2023, and adjusted EBIT margin increased to 15.5 percent from 14.0 percent over the same periods.

The increase in adjusted EBIT was primarily due to the unfavorable impact in the prior year period of higher costs related to labor challenges that limited output at a U.S.

food and beverage closures facility, a more favorable mix of products sold and improved manufacturing productivity, partially offset by lower unit volumes.

Metal Containers Segment

Three Months Ended Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(Dollars in millions)

4 unchanged sentences

Adjusted EBIT margin 9.0 % 10.6 % 8.2 % 9.3 %

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.

In the second quarter of 2024, net sales for the metal containers segment decreased $60.0 million, or 8.4 percent, as compared to the second quarter of 2023.

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.

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.

In the second quarter of 2024, adjusted EBIT of the metal containers segment decreased $17.2 million as compared to the second quarter of 2023, and adjusted EBIT margin decreased to 9.0 percent from 10.6 percent for the same periods.

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.

Custom Containers Segment

Three Months Ended Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(Dollars in millions)

4 unchanged sentences

Adjusted EBIT margin 13.6 % 11.9 % 13.0 % 11.9 %

In the first quarter of 2024, net sales for the custom containers segment decreased $4.3 million, or 2.6 percent, as compared to the first quarter of 2023.

This decrease was principally due to lower volumes of approximately three percent primarily due to customer destocking during the quarter.

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.

In the second quarter of 2024, net sales for the custom containers segment increased $9.4 million, or 6.0 percent, as compared to the second quarter of 2023.

This increase was principally due to higher volumes of approximately seven percent partly driven by earlier than expected commercialization of new business awards and the pass through of higher raw material costs, partially offset by a less favorable mix of products sold and the impact of unfavorable foreign currency translation of $1.0 million.

In the first six months of 2024, net sales for the custom containers segment increased $5.2 million, or 1.6 percent, as compared to the first six months of 2023.

This increase was principally due to higher volumes of approximately two percent and the pass through of higher raw material costs, partially offset by a less favorable mix of products sold.

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.

In the first six months of 2024, adjusted EBIT of the custom containers segment increased $4.2 million as compared to the first six months of 2023, and adjusted EBIT margin increased to 13.0 percent from 11.9 percent over the same periods.

The increase in adjusted EBIT was primarily attributable to higher volumes.

CAPITAL RESOURCES AND LIQUIDITY

1 unchanged sentence

Our liquidity requirements arise from our obligations under the indebtedness incurred in connection with our acquisitions and the refinancing of that indebtedness, capital investment in new and existing equipment, the funding of our seasonal working capital needs and other general corporate uses.

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.

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.

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.

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.

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.

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.

Because we sell metal containers and closures used in fruit and vegetable pack processing, we have seasonal sales.

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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.

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.

Guaranteed Securities

1 unchanged sentence

subsidiaries that also guarantee our obligations under the Credit Agreement, collectively the Obligor Group.

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.

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 March 31, 2024 and December 31, 2023 are not included in noncurrent assets in the table below.

March 31, 2024 Dec.

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.

June 30, 2024 Dec.

(Dollars in millions)

3 unchanged sentences

Noncurrent liabilities 3,087.6 3,123.8

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

$731.0 million and $748.8 million, respectively;

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.

Three months ended

March 31, 2024

Six Months Ended

June 30, 2024

(Dollars in millions)

2 unchanged sentences

Net income 79.2

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:

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;

1 unchanged sentence

and net interest income from such other subsidiary companies of $18.8 million.

For the three months ended March 31, 2024, the Obligor Group did not receive dividends from other subsidiary companies.

For the six months ended June 30, 2024, the Obligor Group did not receive dividends from other subsidiary companies.

Rationalization Charges

1 unchanged sentence

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.

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.

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.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis