slgn-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


			☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


			☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number 000-22117

SILGAN HOLDINGS INC.

(Exact name of Registrant as specified in its charter)


Delaware		06-1269834
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

4 Landmark Square
Stamford,	Connecticut	06901
(Address of principal executive offices)		(Zip Code)

(203) 975-7110

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	SLGN	Nasdaq Global Select Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 30, 2022, the number of shares outstanding of the Registrant’s common stock was 110,800,407.

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SILGAN HOLDINGS INC.

TABLE OF CONTENTS

			Page No.


Part I. Financial Information			3

Item 1. Financial Statements			3

Condensed Consolidated Balance Sheets at March 3 1 , 202 2 and 202 1 and December 31, 202 1			3

Condensed Consolidated Statements of Income for the three months ended March 31 , 202 2 and 202 1			4

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 3 1 , 202 2 and 202 1			5

Condensed Consolidated Statements of Cash Flows for the three months ended March 31 , 202 2 and 202 1			6

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31 , 202 2 and 202 1			7

Notes to Condensed Consolidated Financial Statements			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16

Item 3. Quantitative and Qualitative Disclosures About Market Risk			22

Item 4. Controls and Procedures			22

Part II. Other Information			23

Item 6. Exhibits			23

Signatures			24

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Part I. Financial Information

Item 1. Financial Statements

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)


	March 31, 2022		March 31, 2021		Dec. 31, 2021
	(unaudited)		(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	259,564	$	190,131	$	631,439
Trade accounts receivable, net	852,876		738,088		711,332
Inventories	1,018,685		788,637		798,837
Prepaid expenses and other current assets	150,646		102,382		154,241
Total current assets	2,281,771		1,819,238		2,295,849

Property, plant and equipment, net	1,979,681		1,811,593		1,993,877
Goodwill	2,024,340		1,701,040		2,038,408
Other intangible assets, net	817,450		613,220		830,772
Other assets, net	607,168		496,381		611,940
	$	7,710,410	$	6,441,472	$	7,770,846

Liabilities and Stockholders’ Equity
Current liabilities:
Revolving loans and current portion of long-term debt	$	539,134	$	195,122	$	20,251
Trade accounts payable	850,532		629,494		1,133,318
Accrued payroll and related costs	109,096		105,745		109,279
Accrued liabilities	218,194		224,747		245,674
Total current liabilities	1,716,956		1,155,108		1,508,522

Long-term debt	3,445,633		3,163,292		3,772,926
Deferred income taxes	433,843		357,587		435,252
Other liabilities	475,739		489,129		491,450

Stockholders’ equity:
Common stock	1,751		1,751		1,751
Paid-in capital	328,201		309,635		325,448
Retained earnings	2,758,697		2,452,996		2,691,745
Accumulated other comprehensive loss	(244,642)		(291,806)		(259,828)
Treasury stock	(1,205,768)		(1,196,220)		(1,196,420)
Total stockholders’ equity	1,638,239		1,276,356		1,562,696
	$	7,710,410	$	6,441,472	$	7,770,846

See accompanying notes.

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SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the three months ended March 31, 2022 and 2021

(Dollars and shares in thousands, except per share amounts)

(Unaudited)




	2022		2021

Net sales	$	1,441,886	$	1,238,110
Cost of goods sold	1,208,433		1,016,644
Gross profit	233,453		221,466
Selling, general and administrative expenses	100,011		97,379
Rationalization charges	1,379		10,357
Other pension and postretirement income	(11,329)		(12,819)
Income before interest and income taxes	143,392		126,549
Interest and other debt expense before loss on early extinguishment of debt	29,349		26,423
Loss on early extinguishment of debt	1,481		883
Interest and other debt expense	30,830		27,306
Income before income taxes	112,562		99,243
Provision for income taxes	27,687		25,962
Net income	$	84,875	$	73,281

Earnings per share:
Basic net income per share	$	0.77	$	0.66
Diluted net income per share	$	0.76	$	0.66

Weighted average number of shares:
Basic	110,600		110,206
Effect of dilutive securities	793		824
Diluted	111,393		111,030

See accompanying notes.

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SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three months ended March 31, 2022 and 2021

(Dollars in thousands)

(Unaudited)




	2022		2021

Net income	$	84,875	$	73,281
Other comprehensive income (loss), net of tax:
Changes in net prior service credit and actuarial losses	499		1,878
Change in fair value of derivatives	2,337		641
Foreign currency translation	12,350		(33,372)
Other comprehensive income (loss)	15,186		(30,853)
Comprehensive income	$	100,061	$	42,428

See accompanying notes.

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SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended March 31, 2022 and 2021

(Dollars in thousands)

(Unaudited)


	2022		2021
Cash flows provided by (used in) operating activities:
Net income	$	84,875	$	73,281
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	69,067		60,872
Rationalization charges	1,379		10,357
Stock compensation expense	4,879		5,010
Loss on early extinguishment of debt	1,481		883
Other changes that provided (used) cash, net of effects from acquisitions:
Trade accounts receivable, net	(141,113)		(103,549)
Inventories	(222,137)		(118,132)
Trade accounts payable	(29,881)		(59,825)
Accrued liabilities	(23,291)		(32,062)

Other, net	(12,660)		(8,983)
Net cash used in operating activities	(267,401)		(172,148)

Cash flows provided by (used in) investing activities:
Purchase of businesses, net of cash acquired	(1,333)		—
Capital expenditures	(68,491)		(68,764)
Other, net	(203)		402
Net cash used in investing activities	(70,027)		(68,362)

Cash flows provided by (used in) financing activities:
Borrowings under revolving loans	544,624		170,457
Repayments under revolving loans	(24,408)		(31,310)
Proceeds from issuance of long-term debt	—		499,725
Repayments of long-term debt	(300,000)		(500,000)
Changes in outstanding checks - principally vendors	(225,863)		(84,216)
Dividends paid on common stock	(18,722)		(16,055)
Debt issuance costs	—		(4,633)

Repurchase of common stock	(11,474)		(8,275)


Net cash (used in) provided by financing activities	(35,843)		25,693

Effect of exchange rate changes on cash and cash equivalents	1,396		(4,533)

Cash and cash equivalents:
Net decrease	(371,875)		(219,350)
Balance at beginning of year	631,439		409,481
Balance at end of period	$	259,564	$	190,131

Interest paid, net	$	33,116	$	31,655
Income taxes paid, net	6,718		15,297

See accompanying notes.

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SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the three months ended March 31, 2022 and 2021

(Dollars and shares in thousands, except per share amounts)

(Unaudited)




	2022		2021

Common stock - shares outstanding
Balance at beginning of period	110,410		110,057
Net issuance of treasury stock for vested restricted stock units	390		329

Balance at end of period	110,800		110,386

Common stock - par value
Balance at beginning and end of period	$	1,751	$	1,751

Paid-in capital
Balance at beginning of period	325,448		306,363
Stock compensation expense	4,879		5,010
Net issuance of treasury stock for vested restricted stock units	(2,126)		(1,738)
Balance at end of period	328,201		309,635

Retained earnings
Balance at beginning of period	2,691,745		2,395,395
Net income	84,875		73,281
Dividends declared on common stock	(17,923)		(15,680)
Balance at end of period	2,758,697		2,452,996

Accumulated other comprehensive loss
Balance at beginning of period	(259,828)		(260,953)
Other comprehensive income (loss)	15,186		(30,853)
Balance at end of period	(244,642)		(291,806)

Treasury stock
Balance at beginning of period	(1,196,420)		(1,189,683)
Net issuance of treasury stock for vested restricted stock units	(9,348)		(6,537)

Balance at end of period	(1,205,768)		(1,196,220)
Total stockholders' equity	$	1,638,239	$	1,276,356

Dividends declared on common stock per share	$	0.16	$	0.14

See accompanying notes.

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SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2022 and 2021 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, 2021 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, 2021.

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:




	2022		2021
	(Dollars in thousands)
Dispensing and Specialty Closures	$	597,927	$	509,352
Metal Containers	650,726		554,081
Custom Containers	193,233		174,677
	$	1,441,886	$	1,238,110

Revenues by geography for the three months ended March 31 were as follows:




	2022		2021
	(Dollars in thousands)
North America	$	1,086,224	$	898,402
Europe and other	355,662		339,708
	$	1,441,886	$	1,238,110

Our contract assets primarily consist of unbilled accounts receivable related to over time revenue recognition and were $99.1 million, $86.4 million, and $78.2 million as of March 31, 2022 and 2021 and December 31, 2021, respectively. Unbilled receivables are included in trade accounts receivable, net on our Condensed Consolidated Balance Sheets.

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SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2022 and 2021 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:




	2022		2021
	(Dollars in thousands)
Dispensing and Specialty Closures	$	—	$	5,231
Metal Containers	1,274		5,021
Custom Containers	105		105
	$	1,379	$	10,357

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, 2021	$	41,090	$	157	$	—	$	41,247
Charged to expense	621		733		25		1,379
Utilized and currency translation	(1,839)		(702)		(25)		(2,566)
Balance at March 31, 2022	$	39,872	$	188	$	—	$	40,060

Non-cash asset write-downs were the result of comparing the carrying value of certain production related assets to their fair value using estimated future discounted cash flows, a Level 3 fair value measurement (see Note 7 for information regarding a Level 3 fair value measurement).

Rationalization reserves as of March 31, 2022 were recorded in our Condensed Consolidated Balance Sheet as accrued liabilities of $4.8 million and other liabilities of $35.3 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 $0.6 million and $2.2 million, respectively. Remaining expenses for the accretion of interest for the withdrawal liability related to the Central States Pension Plan are expected to average approximately $1.0 million per year and be recognized annually through 2040, and remaining cash expenditures for the withdrawal liability related to the Central States Pension Plan are expected to be approximately $3.1 million annually through 2040.

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SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2022 and 2021 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, 2021	$	(119,474)	$	(2,327)	$	(138,027)	$	(259,828)
Other comprehensive income before reclassifications	—		2,018		12,350		14,368
Amounts reclassified from accumulated other comprehensive loss	499		319		—		818
Other comprehensive income	499		2,337		12,350		15,186
Balance at March 31, 2022	$	(118,975)	$	10	$	(125,677)	$	(244,642)

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, 2022 were net (losses) of $(0.7) million, excluding an income tax benefit of $0.2 million. These net (losses) consisted of amortization of net actuarial (losses) of $(1.1) million and amortization of net prior service credit of $0.4 million. Amortization of net actuarial losses and net prior service credit was recorded in other pension and postretirement income in our Condensed Consolidated Statements of Income. See Note 9 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, 2022 were not significant.

Other comprehensive loss before reclassifications related to foreign currency translation for the three months ended March 31, 2022 consisted of (i) foreign currency gains related to translation of quarter end financial statements of foreign subsidiaries utilizing a functional currency other than the U.S. dollar of $3.0 million, (ii) foreign currency gains related to intra-entity foreign currency transactions that are of a long-term investment nature of $0.8 million, and (iii) foreign currency gains related to our net investment hedges of $11.3 million, excluding an income tax (provision) of $(2.7) million. See Note 7 for further discussion.

Note 5. Inventories

Inventories consisted of the following:


	March 31, 2022		March 31, 2021		Dec. 31, 2021
	(Dollars in thousands)
Raw materials	$	295,713	$	263,580	$	394,102
Work-in-process	263,878		167,137		157,406
Finished goods	607,087		452,553		394,378
Other	14,787		14,955		15,731
	1,181,465		898,225		961,617
Adjustment to value inventory at cost on the LIFO method	(162,780)		(109,588)		(162,780)
	$	1,018,685	$	788,637	$	798,837

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SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2022 and 2021 and for the

three months then ended is unaudited)

Note 6. Long-Term Debt

Long-term debt consisted of the following:


	March 31, 2022		March 31, 2021		Dec. 31, 2021
	(Dollars in thousands)
Bank debt
Bank revolving loans	$	508,000	$	137,000	$	—
U.S. term loans	1,000,000		400,000		1,000,000

Other foreign bank revolving and term loans	50,014		60,030		38,862
Total bank debt	1,558,014		597,030		1,038,862


4¾% Senior Notes	—		300,000		300,000
3¼% Senior Notes	723,190		763,945		739,180
4⅛% Senior Notes	600,000		600,000		600,000
2¼% Senior Notes	556,300		587,650		568,600
1.4% Senior Secured Notes	500,000		500,000		500,000
Finance leases	67,714		33,936		68,730
Total debt - principal	4,005,218		3,382,561		3,815,372
Less unamortized debt issuance costs and debt discount	20,451		24,147		22,195
Total debt	3,984,767		3,358,414		3,793,177
Less current portion	539,134		195,122		20,251
	$	3,445,633	$	3,163,292	$	3,772,926

At March 31, 2022, the current portion of long-term debt consisted of $508.0 million of bank revolving loans under our amended and restated senior secured credit facility, as amended, or the Credit Agreement, $28.4 million of other foreign bank revolving and term loans and $2.7 million of finance leases.

On March 28, 2022, we redeemed all $300.0 million aggregate principal amount of our outstanding 4¾% Senior Notes due 2025, or the 4¾% Notes, at a redemption price of 100 percent of their principal amount plus accrued and unpaid interest to the redemption date. We funded this redemption with revolving loan borrowings under the Credit Agreement and cash on hand. As a result of this redemption, we recorded a pre-tax charge for the loss on early extinguishment of debt of $1.5 million during the first quarter of 2022 for the write-off of unamortized debt issuance costs.

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SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2022 and 2021 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, 2022:


	Carrying Amount		Fair Value
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	259,564	$	259,564


Liabilities:
Bank debt	$	1,558,014	$	1,558,014


3¼% Senior Notes	723,190		721,671
4⅛% Senior Notes	599,229		575,280
2¼% Senior Notes	556,300		507,624
1.4% Senior Secured Notes	499,784