SILGAN HOLDINGS INC 10-Q

Item 1. Financial Statements SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) Sept. 30, 2024 Sept. 30, 2023 Dec. 31, 2023 (unaudited) (unaudited) Assets Current assets: Cash and cash equivalents $ 368,507 $ 307,124 $ 642,923 Trade accounts receivable, net 1,210,331 1,295,882 599,524 Inventories 780,443 919,013 940,808 Prepaid expenses and other current assets 160,207 139,803 165,727 Total current assets 2,519,488 2,661,822 2,348,982 Property, plant and equipment, net 1,956,004 1,911,638 1,961,585 Goodwill 2,024,055 1,979,693 2,018,241 Other intangible assets, net 681,454 724,340 721,023 Other assets, net 566,365 534,814 561,405 $ 7,747,366 $ 7,812,307 $ 7,611,236 Liabilities and Stockholders’ Equity Current liabilities: Revolving loans and current portion of long-term debt $ 1,254,391 $ 897,809 $ 880,315 Trade accounts payable 678,518 651,991 1,075,913 Accrued payroll and related costs 106,367 96,375 97,886 Accrued liabilities 266,486 269,386 257,742 Total current liabilities 2,305,762 1,915,561 2,311,856 Long-term debt 2,553,659 3,312,685 2,546,451 Deferred income taxes 420,921 380,250 433,666 Other liabilities 413,054 421,922 429,905 Stockholders’ equity: Common stock 1,751 1,751 1,751 Paid-in capital 364,074 349,634 353,848 Retained earnings 3,378,093 3,163,161 3,208,237 Accumulated other comprehensive loss ( 260,597 ) ( 309,586 ) ( 251,361 ) Treasury stock ( 1,429,351 ) ( 1,423,071 ) ( 1,423,117 ) Total stockholders’ equity 2,053,970 1,781,889 1,889,358 $ 7,747,366 $ 7,812,307 $ 7,611,236 See accompanying notes. -3- SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the three and nine months ended September 30, 2024 and 2023 (Dollars and shares in thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended Sept. 30, 2024 Sept. 30, 2023 Sept. 30, 2024 Sept. 30, 2023 Net sales $ 1,745,124 $ 1,803,101 $ 4,443,527 $ 4,648,109 Cost of goods sold 1,451,831 1,517,183 3,670,751 3,874,100 Gross profit 293,293 285,918 772,776 774,009 Selling, general and administrative expenses 106,405 84,320 314,582 287,821 Rationalization charges 19,483 6,424 38,033 13,212 Other pension and postretirement expense (income) 118 1,083 ( 698 ) 3,664 Income before interest and income taxes 167,287 194,091 420,859 469,312 Interest and other debt expense 41,871 47,264 121,861 130,822 Income before income taxes 125,416 146,827 298,998 338,490 Provision for income taxes 25,363 36,210 67,684 76,954 Net income $ 100,053 $ 110,617 $ 231,314 $ 261,536 Earnings per share: Basic net income per share $ 0.94 $ 1.02 $ 2.17 $ 2.39 Diluted net income per share $ 0.93 $ 1.02 $ 2.16 $ 2.38 Weighted average number of shares: Basic 106,847 108,421 106,776 109,583 Effect of dilutive securities 290 331 292 428 Diluted 107,137 108,752 107,068 110,011 See accompanying notes. -4- SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the three and nine months ended September 30, 2024 and 2023 (Dollars in thousands) (Unaudited) Three Months Ended Nine Months Ended Sept. 30, 2024 Sept. 30, 2023 Sept. 30, 2024 Sept. 30, 2023 Net income $ 100,053 $ 110,617 $ 231,314 $ 261,536 Other comprehensive income (loss), net of tax: Changes in net prior service credit and actuarial losses 1,719 1,995 4,533 5,518 Change in fair value of derivatives ( 3,767 ) 1,865 ( 815 ) 5,230 Foreign currency translation 38,981 ( 33,892 ) ( 12,954 ) 24,976 Other comprehensive income (loss) 36,933 ( 30,032 ) ( 9,236 ) 35,724 Comprehensive income $ 136,986 $ 80,585 $ 222,078 $ 297,260 See accompanying notes. -5- SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, 2024 and 2023 (Dollars in thousands) (Unaudited) 2024 2023 Cash flows provided by (used in) operating activities: Net income $ 231,314 $ 261,536 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 198,648 196,722 Amortization of debt discount and debt issuance costs 4,043 4,025 Rationalization charges 38,033 13,212 Stock compensation expense 11,727 11,348 Other changes that provided (used) cash: Trade accounts receivable, net ( 614,632 ) ( 638,282 ) Inventories 160,756 ( 152,891 ) Trade accounts payable ( 213,088 ) ( 233,724 ) Accrued liabilities ( 6,978 ) ( 31,055 ) Other, net ( 23,711 ) ( 26,933 ) Net cash (used in) operating activities ( 213,888 ) ( 596,042 ) Cash flows provided by (used in) investing activities: Capital expenditures ( 192,035 ) ( 173,453 ) Proceeds from asset sales 3,221 1,628 Other, net ( 293 ) 1,267 Net cash (used in) investing activities ( 189,107 ) ( 170,558 ) Cash flows provided by (used in) financing activities: Borrowings under revolving loans 802,389 1,119,960 Repayments under revolving loans ( 310,827 ) ( 281,067 ) Repayment of principal amounts under finance leases ( 27,281 ) ( 2,208 ) Proceeds from issuance of long-term debt — 8,649 Repayments of long-term debt ( 100,000 ) ( 52,650 ) Changes in outstanding checks - principally vendors ( 160,576 ) ( 61,433 ) Dividends paid on common stock ( 61,754 ) ( 59,712 ) Repurchase of common stock ( 7,735 ) ( 183,939 ) Net cash provided by financing activities 134,216 487,600 Effect of exchange rate changes on cash and cash equivalents ( 5,637 ) 502 Cash and cash equivalents: Net (decrease) ( 274,416 ) ( 278,498 ) Balance at beginning of year 642,923 585,622 Balance at end of period $ 368,507 $ 307,124 Interest paid, net $ 133,411 $ 123,944 Income taxes paid, net 69,748 95,911 See accompanying notes. -6- SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the three and nine months ended September 30, 2024 and 2023 (Dollars and shares in thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended Sept. 30, 2024 Sept. 30, 2023 Sept. 30, 2024 Sept. 30, 2023 Common stock - shares outstanding Balance at beginning of period 106,779 109,946 106,500 110,079 Net issuance of treasury stock for vested restricted stock units 16 — 295 312 Repurchases of common stock — ( 3,448 ) — ( 3,893 ) Balance at end of period 106,795 106,498 106,795 106,498 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 360,344 345,442 353,848 339,839 Stock compensation expense 3,779 4,192 11,727 11,348 Net issuance of treasury stock for vested restricted stock units ( 49 ) — ( 1,501 ) ( 1,553 ) Balance at end of period 364,074 349,634 364,074 349,634 Retained earnings Balance at beginning of period 3,298,525 3,072,021 3,208,237 2,961,079 Net income 100,053 110,617 231,314 261,536 Dividends declared on common stock ( 20,485 ) ( 19,477 ) ( 61,458 ) ( 59,454 ) Balance at end of period 3,378,093 3,163,161 3,378,093 3,163,161 Accumulated other comprehensive loss Balance at beginning of period ( 297,530 ) ( 279,554 ) ( 251,361 ) ( 345,310 ) Other comprehensive income (loss) 36,933 ( 30,032 ) ( 9,236 ) 35,724 Balance at end of period ( 260,597 ) ( 309,586 ) ( 260,597 ) ( 309,586 ) Treasury stock Balance at beginning of period ( 1,429,400 ) ( 1,268,524 ) ( 1,423,117 ) ( 1,239,103 ) Net issuance of treasury stock for vested restricted stock units 49 — ( 6,234 ) ( 7,664 ) Repurchases of common stock — ( 154,547 ) — ( 176,304 ) Balance at end of period ( 1,429,351 ) ( 1,423,071 ) ( 1,429,351 ) ( 1,423,071 ) Total stockholders’ equity $ 2,053,970 $ 1,781,889 $ 2,053,970 $ 1,781,889 Dividends declared on common stock per share $ 0.19 $ 0.18 $ 0.57 $ 0.54 See accompanying notes. -7- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2024 and 2023 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, 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 conform with the current year's presentation. 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 2024 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 Ended Nine Months Ended Sept. 30, 2024 Sept. 30, 2023 Sept. 30, 2024 Sept. 30, 2023 (Dollars in thousands) Dispensing and Specialty Closures $ 563,669 $ 559,081 $ 1,664,966 $ 1,699,109 Metal Containers 1,022,605 1,094,609 2,290,530 2,475,569 Custom Containers 158,850 149,411 488,031 473,431 $ 1,745,124 $ 1,803,101 $ 4,443,527 $ 4,648,109 Revenues by geography were as follows: Three Months Ended Nine Months Ended Sept. 30, 2024 Sept. 30, 2023 Sept. 30, 2024 Sept. 30, 2023 (Dollars in thousands) North America $ 1,368,104 $ 1,437,539 $ 3,384,468 $ 3,555,971 Europe and other 377,020 365,562 1,059,059 1,092,138 $ 1,745,124 $ 1,803,101 $ 4,443,527 $ 4,648,109 Our contract assets primarily consist of unbilled accounts receivable related to over time revenue recognition and were $ 110.7 million, $ 104.2 million, and $ 100.0 million as of September 30, 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 September 30, 2024 and 2023 and for the three and nine 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 were as follows: Three Months Ended Nine Months Ended Sept. 30, 2024 Sept. 30, 2023 Sept. 30, 2024 Sept. 30, 2023 (Dollars in thousands) Dispensing and Specialty Closures $ 9,835 $ 3,836 $ 19,583 $ 5,164 Metal Containers 7,850 2,588 13,927 7,944 Custom Containers 1,798 — 4,523 104 $ 19,483 $ 6,424 $ 38,033 $ 13,212 Activity in reserves for our rationalization plans were as follows: Employee Severance and Benefits Plant Exit Costs Non-Cash Asset Write-Downs Total (Dollars in thousands) Balance at December 31, 2023 $ 33,555 $ 465 $ — $ 34,020 Charged to expense 6,723 19,942 11,368 38,033 Utilized and currency translation ( 10,842 ) ( 20,407 ) ( 11,368 ) ( 42,617 ) Balance at September 30, 2024 $ 29,436 $ — $ — $ 29,436 Non-cash asset write-downs were the result of comparing the carrying value of certain facilities and production related equipment to their fair value using estimated future discounted cash flows, a Level 3 fair value measurement (see Note 7 for information regarding a Level 3 fair value measurement). Rationalization reserves as of September 30, 2024 were recorded in our Condensed Consolidated Balance Sheet as accrued liabilities of $ 3.6 million and other liabilities of $ 25.8 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 $ 6.9 million and $ 9.5 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 September 30, 2024 and 2023 and for the three and nine 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 — 837 ( 12,954 ) ( 12,117 ) Amounts reclassified from accumulated other comprehensive loss 4,533 ( 1,652 ) — 2,881 Other comprehensive loss 4,533 ( 815 ) ( 12,954 ) ( 9,236 ) Balance at September 30, 2024 $ ( 128,990 ) $ ( 1,031 ) $ ( 130,576 ) $ ( 260,597 ) 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, 2024 were net (losses) of $( 2.2 ) million and $( 5.7 ) million, respectively, excluding income tax benefits of $ 0.4 million and $ 1.2 million, respectively. For the three and nine months ended September 30, 2024, these net (losses) consisted primarily of amortization of net actuarial (losses) of $( 2.1 ) million and $( 5.7 ) million, respectively. 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 and nine months ended September 30, 2024 were not significant. Other comprehensive loss before reclassifications related to foreign currency translation for the three and nine months ended September 30, 2024 consisted of (i) foreign currency gains (losses) related to translation of quarter end financial statements of foreign subsidiaries utilizing a functional currency other than the U.S. dollar of $ 54.8 million and $( 8.9 ) million, respectively, and (ii) foreign currency (losses) related to our net investment hedges of $( 20.9 ) million and $( 5.4 ) million, respectively, excluding income tax benefits of $ 5.0 million and $ 1.3 million, respectively. See Note 7 for further discussion. -10- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2024 and 2023 and for the three and nine months then ended is unaudited) Note 5. Inventories Inventories consisted of the following: Sept. 30, 2024 Sept. 30, 2023 Dec. 31, 2023 (Dollars in thousands) Raw materials $ 400,916 $ 460,137 $ 465,375 Work-in-process 192,986 220,164 219,462 Finished goods 486,641 565,790 556,737 Other 17,282 17,234 16,616 1,097,825 1,263,325 1,258,190 Adjustment to value inventory at cost on the LIFO method ( 317,382 ) ( 344,312 ) ( 317,382 ) $ 780,443 $ 919,013 $ 940,808 Note 6. Long-Term Debt Long-term debt consisted of the following: Sept. 30, 2024 Sept. 30, 2023 Dec. 31, 2023 (Dollars in thousands) Bank debt Bank revolving loans $ 505,000 $ 818,000 $ — U.S. term loans 850,000 950,000 950,000 Other foreign bank revolving and term loans 43,127 75,502 56,243 Total bank debt 1,398,127 1,843,502 1,006,243 3¼% Senior Notes 725,400 688,155 717,990 4⅛% Senior Notes 600,000 600,000 600,000 2¼% Senior Notes 558,000 529,350 552,300 1.4 % Senior Secured Notes 500,000 500,000 500,000 Finance leases 36,342 63,663 63,302 Total debt - principal 3,817,869 4,224,670 3,439,835 Less unamortized debt issuance costs and debt discount 9,819 14,176 13,069 Total debt 3,808,050 4,210,494 3,426,766 Less current portion 1,254,391 897,809 880,315 $ 2,553,659 $ 3,312,685 $ 2,546,451 At September 30, 2024, the current portion of long-term debt consisted of $ 725.4 million of 3¼% Senior Notes due 2025, or the 3¼% Senior Notes, $ 505.0 million of U.S. revolving loans under our amended and restated senior secured credit facility, as amended, or the Credit Agreement, $ 22.3 million of other foreign bank revolving and term loans and $ 1.7 million of finance leases. See Note 15 for further information. -11- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2024 and 2023 and for the three and nine 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 September 30, 2024: Carrying Amount Fair Value (Dollars in thousands) Assets: Cash and cash equivalents $ 368,507 $ 368,507 Liabilities: Bank debt $ 1,398,127 $ 1,398,127 3¼% Senior Notes 725,400 723,949 4⅛% Senior Notes 599,532 585,354 2¼% Senior Notes 558,000 524,609 1.4 % Senior Secured Notes 499,916 474,235 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, 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 September 30, 2024 and 2023 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 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 $ 300 million aggregate notional principal amount of U.S. dollar interest rate swap agreements to manage a portion of our exposure to interest rate fluctuations. These agreements have a weighted average fixed rate of 3.90 percent, mature in April 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 and nine months ended September 30, 2024. The total fair value of our interest rate swaps agreements in effect at September 30, 2024 was not significant. See Note 15 for further information. 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 and nine months ended September 30, 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 September 30, 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 (losses) related to our net investment hedges included in accumulated other comprehensive loss for the three and nine months ended September 30, 2024 were $( 20.9 ) million and $( 5.4 ) million, respectively. -13- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2024 and 2023 and for the three and nine 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 $ 284.2 million, $ 294.1 million and $ 330.2 million at September 30, 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 were as follows: Three Months Ended Nine Months Ended Sept. 30, 2024 Sept. 30, 2023 Sept. 30, 2024 Sept. 30, 2023 (Dollars in thousands) Service cost $ 1,990 $ 1,962 $ 6,319 $ 6,425 Interest cost 8,592 8,617 25,413 26,050 Expected return on plan assets ( 10,772 ) ( 10,211 ) ( 32,314 ) ( 30,587 ) Amortization of prior service cost 22 29 68 82 Amortization of actuarial losses 2,232 2,845 5,937 8,729 Net periodic benefit cost $ 2,064 $ 3,242 $ 5,423 $ 10,699 The components of the net periodic other postretirement benefit cost (credit) were as follows: Three Months Ended Nine Months Ended Sept. 30, 2024 Sept. 30, 2023 Sept. 30, 2024 Sept. 30, 2023 (Dollars in thousands) Service cost $ 8 $ 12 $ 22 $ 38 Interest cost 151 181 483 559 Amortization of prior service credit ( 5 ) ( 237 ) ( 15 ) ( 705 ) Amortization of actuarial gains ( 102 ) ( 141 ) ( 270 ) ( 464 ) Net periodic benefit cost (credit) $ 52 $ ( 185 ) $ 220 $ ( 572 ) -14- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2024 and 2023 and for the three and nine 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 nine months ended September 30, 2024. At September 30, 2024, we had approximately $ 93.3 million remaining under this authorization for the repurchase of our common stock. During the first nine months of 2024, we issued 470,788 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 176,093 shares of our common stock at an average cost of $ 43.92 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, 2024, 68,317,846 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 nine months of 2024, 490,672 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 $ 21.6 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 September 30, 2024 and 2023 and for the three and nine 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, rationalization charges and costs attributed to announced acquisitions. 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 was as follows: Dispensing and Specialty Closures Metal Containers Custom Containers Corporate Total (Dollars in thousands) Three Months Ended September 30, 2024 Net sales $ 563,669 $ 1,022,605 $ 158,850 $ — $ 1,745,124 Income before interest and income taxes 74,659 89,307 17,136 ( 13,815 ) 167,287 Adjusted EBIT 95,216 97,065 20,011 ( 6,704 ) 205,588 Depreciation 25,755 19,801 8,747 47 54,350 Three Months Ended September 30, 2023 Net sales $ 559,081 $ 1,094,609 $ 149,411 $ — $ 1,803,101 Income before interest and income taxes 77,949 110,185 10,668 ( 4,711 ) 194,091 Adjusted EBIT 93,786 113,519 11,839 ( 4,711 ) 214,433 Depreciation 25,691 18,177 8,089 8 51,965 Nine Months Ended September 30, 2024 Net sales $ 1,664,966 $ 2,290,530 $ 488,031 $ — $ 4,443,527 Income before interest and income taxes 213,320 187,290 55,464 ( 35,215 ) 420,859 Adjusted EBIT 265,773 200,532 62,724 ( 22,597 ) 506,432 Depreciation 76,290 57,606 26,634 115 160,645 Nine Months Ended September 30, 2023 Net sales $ 1,699,109 $ 2,475,569 $ 473,431 $ — $ 4,648,109 Income before interest and income taxes 212,612 231,563 46,082 ( 20,945 ) 469,312 Adjusted EBIT 253,604 241,659 50,317 ( 20,945 ) 524,635 Depreciation 76,206 54,693 25,923 66 156,888 -16- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2024 and 2023 and for the three and nine months then ended is unaudited) Total adjusted EBIT is reconciled to income before income taxes as follows: Three Months Ended Nine Months Ended Sept. 30, 2024 Sept. 30, 2023 Sept. 30, 2024 Sept. 30, 2023 (Dollars in thousands) Total adjusted EBIT $ 205,588 $ 214,433 $ 506,432 $ 524,635 Less: Acquired intangible asset amortization expense 12,367 13,309 38,004 39,834 Other pension (income) expense for U.S. pension plans ( 660 ) 609 ( 3,082 ) 2,277 Rationalization charges 19,483 6,424 38,033 13,212 Costs attributed to announced acquisitions 7,111 — 12,618 — Income before interest and income taxes 167,287 194,091 420,859 469,312 Less interest and other debt expense 41,871 47,264 121,861 130,822 Income before income taxes $ 125,416 $ 146,827 $ 298,998 $ 338,490 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. Note 15. Subsequent Events Weener Plastics Holding B.V. Acquisition On October 15, 2024, we acquired Weener Plastics Holding B.V., or Weener, a leading producer of differentiated dispensing solutions for personal care, food and healthcare products. Weener operates a global network of 19 facilities predominantly in Europe and the Americas, with approximately 4,000 employees and proprietary manufacturing technologies including significant clean room capabilities. The purchase price for this acquisition of approximately € 844.2 million, net of cash acquired, was funded with term and revolving loan borrowings under the Credit Agreement, including a new € 700.0 million incremental term loan, and cash on hand. Euro Interest Rate Swap Agreements In October 2024, we entered into € 685.0 million aggregate notional principal amount of Euro interest rate swap agreements to manage a portion of our exposure to interest rate fluctuations for our Euro term loans under the Credit Agreement, which mature as follows: € 35.0 million in October 2026, € 70.0 million in October 2027 and € 580.0 million in October 2030. These agreements have a weighted average fixed rate of 2.43 percent and were entered into with financial institutions which are expected to fully perform under the terms thereof. Amendment to Bank Credit Agreement On November 4, 2024, we and certain of our wholly owned subsidiaries amended the Credit Agreement by entering into a Fifth Amendment to Amended and Restated Credit Agreement (the “Fifth Amendment”) with the Lenders therein and Wells Fargo Bank, National Association, as Administrative Agent. The Fifth Amendment: • refinanced outstanding term loans and revolving loans thereunder and extended the maturity dates to (i) November 4, 2029 with respect to revolving loans and (ii) November 4, 2030 with respect to term loans; • increased the aggregate amount of Euro term loans thereunder from € 700.0 million to € 900.0 million, with the additional € 200.0 million of Euro term loans being used to repay revolving loans under the Credit Agreement that were -17- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2024 and 2023 and for the three and nine months then ended is unaudited) used to fund a portion of the purchase price for Weener and to pay fees, expenses and costs associated with the Fifth Amendment. • removed the springing maturity date provisions that would have shortened the maturity dates under the Credit Agreement to the date that is 91 days prior to the maturity dates of the 3¼% Senior Notes and 1.4 % Senior Secured Notes due 2026 (unless such notes were refinanced or repaid prior thereto); • improved the interest rate margin grid for term loans; • increased the uncommitted multi-currency incremental loan facility from $ 1.25 billion to $ 1.5 billion; • amended certain covenants to provide additional flexibility; and • amended certain other terms of the Credit Agreement. Pursuant to the Fifth Amendment, U.S. term loans are repayable in installments as follows: $ 8.5 million on December 31, 2025, $ 42.5 million on December 31, 2026, $ 85.0 million on each of December 31, 2027, 2028 and 2029 and $ 544.0 million on November 4, 2030, and Euro term loans are repayable in installments as follows: € 9.0 million on December 31, 2025, € 45.0 million on December 31, 2026, € 90.0 million on each of December 31, 2027, 2028 and 2029 and € 576.0 million on November 4, 2030. -18-