UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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| ☒ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 20202021
OR
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| ☐ | | 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 July 31, 2020,2021, the number of shares outstanding of the Registrant’s common stock was 110,885,829.110,408,113.
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SILGAN HOLDINGS INC. | |
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Part I. Financial Information
Item 1. Financial Statements
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| | | June 30, 2020 | | June 30, 2019 | | Dec. 31, 2019 | | June 30, 2021 | | June 30, 2020 | | Dec. 31, 2020 |
| | (unaudited) | | (unaudited) | | | | (unaudited) | | (unaudited) | | |
Assets | Assets | | | | | | Assets | | | | | |
| Current assets: | Current assets: | | | | | | Current assets: | | | | | |
Cash and cash equivalents | Cash and cash equivalents | $ | 191,082 | | | $ | 111,341 | | | $ | 203,824 | | Cash and cash equivalents | $ | 164,821 | | | $ | 191,082 | | | $ | 409,481 | |
Trade accounts receivable, net | Trade accounts receivable, net | 729,275 | | | 666,681 | | | 504,986 | | Trade accounts receivable, net | 891,812 | | | 729,275 | | | 619,535 | |
Inventories | Inventories | 821,448 | | | 822,584 | | | 633,005 | | Inventories | 907,805 | | | 821,448 | | | 677,534 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | 85,918 | | | 59,245 | | | 64,993 | | Prepaid expenses and other current assets | 88,818 | | | 85,918 | | | 92,643 | |
Total current assets | Total current assets | 1,827,723 | | | 1,659,851 | | | 1,406,808 | | Total current assets | 2,053,256 | | | 1,827,723 | | | 1,799,193 | |
| Property, plant and equipment, net | Property, plant and equipment, net | 1,729,481 | | | 1,523,850 | | | 1,570,331 | | Property, plant and equipment, net | 1,832,885 | | | 1,729,481 | | | 1,840,758 | |
Goodwill | Goodwill | 1,668,614 | | | 1,146,363 | | | 1,142,223 | | Goodwill | 1,719,815 | | | 1,668,614 | | | 1,741,496 | |
Other intangible assets, net | Other intangible assets, net | 635,156 | | | 369,210 | | | 354,615 | | Other intangible assets, net | 609,882 | | | 635,156 | | | 637,208 | |
Other assets, net | Other assets, net | 512,082 | | | 411,944 | | | 457,082 | | Other assets, net | 508,481 | | | 512,082 | | | 492,931 | |
| | $ | 6,373,056 | | | $ | 5,111,218 | | | $ | 4,931,059 | | | $ | 6,724,319 | | | $ | 6,373,056 | | | $ | 6,511,586 | |
| Liabilities and Stockholders’ Equity | Liabilities and Stockholders’ Equity | | | | | | Liabilities and Stockholders’ Equity | | | | | |
| Current liabilities: | Current liabilities: | | | | | | Current liabilities: | | | | | |
Revolving loans and current portion of long-term debt | Revolving loans and current portion of long-term debt | $ | 391,418 | | | $ | 886,458 | | | $ | 29,813 | | Revolving loans and current portion of long-term debt | $ | 240,859 | | | $ | 391,418 | | | $ | 28,036 | |
Trade accounts payable | Trade accounts payable | 601,740 | | | 598,484 | | | 727,053 | | Trade accounts payable | 727,523 | | | 601,740 | | | 802,541 | |
Accrued payroll and related costs | Accrued payroll and related costs | 103,458 | | | 68,585 | | | 66,866 | | Accrued payroll and related costs | 112,270 | | | 103,458 | | | 130,088 | |
Accrued liabilities | Accrued liabilities | 266,512 | | | 143,360 | | | 194,797 | | Accrued liabilities | 234,503 | | | 266,512 | | | 230,955 | |
Total current liabilities | Total current liabilities | 1,363,128 | | | 1,696,887 | | | 1,018,529 | | Total current liabilities | 1,315,155 | | | 1,363,128 | | | 1,191,620 | |
| Long-term debt | Long-term debt | 3,106,425 | | | 1,824,533 | | | 2,214,608 | | Long-term debt | 3,176,393 | | | 3,106,425 | | | 3,223,217 | |
Deferred income taxes | Deferred income taxes | 357,131 | | | 270,430 | | | 254,836 | | Deferred income taxes | 360,027 | | | 357,131 | | | 355,995 | |
Other liabilities | Other liabilities | 456,678 | | | 389,466 | | | 419,764 | | Other liabilities | 484,164 | | | 456,678 | | | 487,881 | |
| Stockholders’ equity: | Stockholders’ equity: | | | | | | Stockholders’ equity: | | | | | |
Common stock | Common stock | 1,751 | | | 1,751 | | | 1,751 | | Common stock | 1,751 | | | 1,751 | | | 1,751 | |
Paid-in capital | Paid-in capital | 296,639 | | | 280,636 | | | 289,422 | | Paid-in capital | 314,873 | | | 296,639 | | | 306,363 | |
Retained earnings | Retained earnings | 2,249,391 | | | 2,049,995 | | | 2,141,302 | | Retained earnings | 2,531,783 | | | 2,249,391 | | | 2,395,395 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (297,360) | | | (265,373) | | | (259,742) | | Accumulated other comprehensive loss | (263,433) | | | (297,360) | | | (260,953) | |
Treasury stock | Treasury stock | (1,160,727) | | | (1,137,107) | | | (1,149,411) | | Treasury stock | (1,196,394) | | | (1,160,727) | | | (1,189,683) | |
Total stockholders’ equity | Total stockholders’ equity | 1,089,694 | | | 929,902 | | | 1,023,322 | | Total stockholders’ equity | 1,388,580 | | | 1,089,694 | | | 1,252,873 | |
| | $ | 6,373,056 | | | $ | 5,111,218 | | | $ | 4,931,059 | | | $ | 6,724,319 | | | $ | 6,373,056 | | | $ | 6,511,586 | |
See accompanying notes.
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three and six months ended June 30, 20202021 and 20192020
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
| | | Three Months Ended | | | Six Months Ended | | | Three Months Ended | | Six Months Ended |
| | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 | | | June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 |
| | | | | | | | | | | | | | | | | |
Net sales | Net sales | $ | 1,176,470 | | | $ | 1,093,163 | | | $ | 2,206,854 | | | $ | 2,120,294 | | | Net sales | $ | 1,348,661 | | | $ | 1,176,470 | | | $ | 2,586,771 | | | $ | 2,206,854 | |
Cost of goods sold | Cost of goods sold | 952,375 | | | 909,650 | | | 1,797,661 | | | 1,770,784 | | | Cost of goods sold | 1,113,777 | | | 952,375 | | | 2,130,421 | | | 1,797,661 | |
Gross profit | Gross profit | 224,095 | | | 183,513 | | | 409,193 | | | 349,510 | | | Gross profit | 234,884 | | | 224,095 | | | 456,350 | | | 409,193 | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 100,624 | | | 80,087 | | | 190,487 | | | 157,749 | | | Selling, general and administrative expenses | 94,394 | | | 100,624 | | | 191,773 | | | 190,487 | |
Rationalization charges | Rationalization charges | 1,942 | | | 39,317 | | | 4,741 | | | 45,400 | | | Rationalization charges | 354 | | | 1,942 | | | 10,711 | | | 4,741 | |
Other pension and postretirement income | Other pension and postretirement income | (9,705) | | | (4,490) | | | (19,410) | | | (8,980) | | | Other pension and postretirement income | (12,818) | | | (9,705) | | | (25,637) | | | (19,410) | |
Income before interest and income taxes | Income before interest and income taxes | 131,234 | | | 68,599 | | | 233,375 | | | 155,341 | | | Income before interest and income taxes | 152,954 | | | 131,234 | | | 279,503 | | | 233,375 | |
Interest and other debt expense before loss on early extinguishment of debt | Interest and other debt expense before loss on early extinguishment of debt | 25,837 | | | 28,401 | | | 49,326 | | | 55,505 | | | Interest and other debt expense before loss on early extinguishment of debt | 26,406 | | | 25,837 | | | 52,829 | | | 49,326 | |
Loss on early extinguishment of debt | Loss on early extinguishment of debt | — | | | — | | | 1,481 | | | — | | | Loss on early extinguishment of debt | 0 | | | 0 | | | 883 | | | 1,481 | |
Interest and other debt expense | Interest and other debt expense | 25,837 | | | 28,401 | | | 50,807 | | | 55,505 | | | Interest and other debt expense | 26,406 | | | 25,837 | | | 53,712 | | | 50,807 | |
Income before income taxes | Income before income taxes | 105,397 | | | 40,198 | | | 182,568 | | | 99,836 | | | Income before income taxes | 126,548 | | | 105,397 | | | 225,791 | | | 182,568 | |
Provision for income taxes | Provision for income taxes | 27,225 | | | 9,243 | | | 46,796 | | | 22,140 | | | Provision for income taxes | 32,072 | | | 27,225 | | | 58,034 | | | 46,796 | |
Net income | Net income | $ | 78,172 | | | $ | 30,955 | | | $ | 135,772 | | | $ | 77,696 | | | Net income | $ | 94,476 | | | $ | 78,172 | | | $ | 167,757 | | | $ | 135,772 | |
| Earnings per share: | Earnings per share: | | | Earnings per share: | |
Basic net income per share | Basic net income per share | $ | 0.70 | | | $ | 0.28 | | | $ | 1.22 | | | $ | 0.70 | | | Basic net income per share | $ | 0.86 | | | $ | 0.70 | | | $ | 1.52 | | | $ | 1.22 | |
Diluted net income per share | Diluted net income per share | $ | 0.70 | | | $ | 0.28 | | | $ | 1.22 | | | $ | 0.70 | | | Diluted net income per share | $ | 0.85 | | | $ | 0.70 | | | $ | 1.51 | | | $ | 1.22 | |
| Weighted average number of shares: | Weighted average number of shares: | | | Weighted average number of shares: | |
Basic | Basic | 110,901 | | | 111,185 | | | 110,879 | | | 110,945 | | | Basic | 110,442 | | | 110,901 | | | 110,323 | | | 110,879 | |
Effect of dilutive securities | Effect of dilutive securities | 433 | | | 317 | | | 501 | | | 600 | | | Effect of dilutive securities | 661 | | | 433 | | | 743 | | | 501 | |
Diluted | Diluted | 111,334 | | | 111,502 | | | 111,380 | | | 111,545 | | | Diluted | 111,103 | | | 111,334 | | | 111,066 | | | 111,380 | |
|
See accompanying notes.
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three and six months ended June 30, 20202021 and 20192020
(Dollars in thousands)
(Unaudited)
| | | Three Months Ended | | | Six Months Ended | | | Three Months Ended | | Six Months Ended |
| | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 | | | June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 |
| Net income | Net income | $ | 78,172 | | | $ | 30,955 | | | $ | 135,772 | | | $ | 77,696 | | | Net income | $ | 94,476 | | | $ | 78,172 | | | $ | 167,757 | | | $ | 135,772 | |
Other comprehensive income (loss), net of tax: | Other comprehensive income (loss), net of tax: | | | | | | Other comprehensive income (loss), net of tax: | |
Changes in net prior service credit and actuarial losses | Changes in net prior service credit and actuarial losses | 1,809 | | | 2,614 | | | 2,748 | | | 5,120 | | | Changes in net prior service credit and actuarial losses | 1,876 | | | 1,809 | | | 3,754 | | | 2,748 | |
Change in fair value of derivatives | Change in fair value of derivatives | 104 | | | (1,601) | | | (2,351) | | | (2,488) | | | Change in fair value of derivatives | 828 | | | 104 | | | 1,469 | | | (2,351) | |
Foreign currency translation | Foreign currency translation | (1,576) | | | 6,045 | | | (38,015) | | | 803 | | | Foreign currency translation | 25,669 | | | (1,576) | | | (7,703) | | | (38,015) | |
Other comprehensive income (loss) | Other comprehensive income (loss) | 337 | | | 7,058 | | | (37,618) | | | 3,435 | | | Other comprehensive income (loss) | 28,373 | | | 337 | | | (2,480) | | | (37,618) | |
Comprehensive income | Comprehensive income | $ | 78,509 | | | $ | 38,013 | | | $ | 98,154 | | | $ | 81,131 | | | Comprehensive income | $ | 122,849 | | | $ | 78,509 | | | $ | 165,277 | | | $ | 98,154 | |
See accompanying notes.
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 20202021 and 20192020
(Dollars in thousands)
(Unaudited)
| | | 2020 | | 2019 | | 2021 | | 2020 |
Cash flows provided by (used in) operating activities: | Cash flows provided by (used in) operating activities: | | | | Cash flows provided by (used in) operating activities: | | | |
Net income | Net income | $ | 135,772 | | | $ | 77,696 | | Net income | $ | 167,757 | | | $ | 135,772 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | |
Depreciation and amortization | Depreciation and amortization | 104,197 | | | 104,102 | | Depreciation and amortization | 122,386 | | | 104,197 | |
Rationalization charges | Rationalization charges | 4,741 | | | 45,400 | | Rationalization charges | 10,711 | | | 4,741 | |
Stock compensation expense | Stock compensation expense | 9,056 | | | 8,244 | | Stock compensation expense | 10,337 | | | 9,056 | |
Loss on early extinguishment of debt | Loss on early extinguishment of debt | 1,481 | | | — | | Loss on early extinguishment of debt | 883 | | | 1,481 | |
Other changes that provided (used) cash, net of effects from acquisitions: | Other changes that provided (used) cash, net of effects from acquisitions: | | | | Other changes that provided (used) cash, net of effects from acquisitions: | | | |
Trade accounts receivable, net | Trade accounts receivable, net | (179,949) | | | (155,198) | | Trade accounts receivable, net | (277,768) | | | (179,949) | |
Inventories | Inventories | (148,141) | | | (187,790) | | Inventories | (233,815) | | | (148,141) | |
Trade accounts payable | Trade accounts payable | (68,026) | | | (19,421) | | Trade accounts payable | 31,825 | | | (68,026) | |
Accrued liabilities | Accrued liabilities | 67,936 | | | (22,875) | | Accrued liabilities | (24,316) | | | 67,936 | |
| Other, net | Other, net | 9,129 | | | 20,764 | | Other, net | (17,313) | | | 9,129 | |
Net cash used in operating activities | Net cash used in operating activities | (63,804) | | | (129,078) | | Net cash used in operating activities | (209,313) | | | (63,804) | |
| Cash flows provided by (used in) investing activities: | Cash flows provided by (used in) investing activities: | | | | Cash flows provided by (used in) investing activities: | | | |
Purchase of businesses, net of cash acquired | Purchase of businesses, net of cash acquired | (941,102) | | | — | | Purchase of businesses, net of cash acquired | 2,305 | | | (941,102) | |
Capital expenditures | Capital expenditures | (106,436) | | | (116,165) | | Capital expenditures | (123,604) | | | (106,436) | |
Other, net | Other, net | 983 | | | 560 | | Other, net | 4,914 | | | 983 | |
Net cash used in investing activities | Net cash used in investing activities | (1,046,555) | | | (115,605) | | Net cash used in investing activities | (116,385) | | | (1,046,555) | |
| Cash flows provided by (used in) financing activities: | Cash flows provided by (used in) financing activities: | | | | Cash flows provided by (used in) financing activities: | | | |
Borrowings under revolving loans | Borrowings under revolving loans | 927,302 | | | 703,359 | | Borrowings under revolving loans | 318,141 | | | 927,302 | |
Repayments under revolving loans | Repayments under revolving loans | (570,955) | | | (287,368) | | Repayments under revolving loans | (105,856) | | | (570,955) | |
Proceeds from issuance of long-term debt | Proceeds from issuance of long-term debt | 1,639,661 | | | — | | Proceeds from issuance of long-term debt | 499,725 | | | 1,639,661 | |
Repayments of long-term debt | Repayments of long-term debt | (766,170) | | | (8,161) | | Repayments of long-term debt | (500,000) | | | (766,170) | |
Changes in outstanding checks - principally vendors | Changes in outstanding checks - principally vendors | (79,006) | | | (83,670) | | Changes in outstanding checks - principally vendors | (84,216) | | | (79,006) | |
Dividends paid on common stock | Dividends paid on common stock | (27,121) | | | (26,415) | | Dividends paid on common stock | (31,564) | | | (27,121) | |
Debt issuance costs | Debt issuance costs | (10,265) | | | — | | Debt issuance costs | (4,905) | | | (10,265) | |
| Repurchase of common stock | Repurchase of common stock | (13,155) | | | (15,252) | | Repurchase of common stock | (8,538) | | | (13,155) | |
| Net cash provided by financing activities | Net cash provided by financing activities | 1,100,291 | | | 282,493 | | Net cash provided by financing activities | 82,787 | | | 1,100,291 | |
| Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | (2,674) | | | 712 | | Effect of exchange rate changes on cash and cash equivalents | (1,749) | | | (2,674) | |
| Cash and cash equivalents: | Cash and cash equivalents: | | | | Cash and cash equivalents: | | | |
Net (decrease) increase | (12,742) | | | 38,522 | | |
Net decrease | | Net decrease | (244,660) | | | (12,742) | |
Balance at beginning of year | Balance at beginning of year | 203,824 | | | 72,819 | | Balance at beginning of year | 409,481 | | | 203,824 | |
Balance at end of period | Balance at end of period | $ | 191,082 | | | $ | 111,341 | | Balance at end of period | $ | 164,821 | | | $ | 191,082 | |
| Interest paid, net | Interest paid, net | $ | 38,058 | | | $ | 53,069 | | Interest paid, net | $ | 48,026 | | | $ | 38,058 | |
Income taxes paid, net | Income taxes paid, net | 28,974 | | | 23,634 | | Income taxes paid, net | 47,297 | | | 28,974 | |
See accompanying notes.
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the three and six months ended June 30, 20202021 and 20192020
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
| | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended | | Six Months Ended |
| | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 | | | June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 |
| Common stock - shares outstanding | Common stock - shares outstanding | | Common stock - shares outstanding | |
Balance at beginning of period | Balance at beginning of period | 110,834 | | | 111,128 | | | 110,780 | | | 110,430 | | | Balance at beginning of period | 110,386 | | | 110,834 | | | 110,057 | | | 110,780 | |
Net issuance of treasury stock for vested restricted stock units | Net issuance of treasury stock for vested restricted stock units | 52 | | | 48 | | | 365 | | | 746 | | | Net issuance of treasury stock for vested restricted stock units | 22 | | | 52 | | | 351 | | | 365 | |
Repurchases of common stock | Repurchases of common stock | — | | | — | | | (259) | | | — | | | Repurchases of common stock | 0 | | | 0 | | | 0 | | | (259) | |
Balance at end of period | Balance at end of period | 110,886 | | | 111,176 | | | 110,886 | | | 111,176 | | | Balance at end of period | 110,408 | | | 110,886 | | | 110,408 | | | 110,886 | |
| Common stock - par value | Common stock - par value | | Common stock - par value | |
Balance at beginning and end of period | Balance at beginning and end of period | $ | 1,751 | | | $ | 1,751 | | | $ | 1,751 | | | $ | 1,751 | | | Balance at beginning and end of period | $ | 1,751 | | | $ | 1,751 | | | $ | 1,751 | | | $ | 1,751 | |
| Paid-in capital | Paid-in capital | | Paid-in capital | |
Balance at beginning of period | Balance at beginning of period | 292,283 | | | 276,435 | | | 289,422 | | | 276,062 | | | Balance at beginning of period | 309,635 | | | 292,283 | | | 306,363 | | | 289,422 | |
Stock compensation expense | Stock compensation expense | 4,573 | | | 4,335 | | | 9,056 | | | 8,244 | | | Stock compensation expense | 5,327 | | | 4,573 | | | 10,337 | | | 9,056 | |
Net issuance of treasury stock for vested restricted stock units | Net issuance of treasury stock for vested restricted stock units | (217) | | | (134) | | | (1,839) | | | (3,670) | | | Net issuance of treasury stock for vested restricted stock units | (89) | | | (217) | | | (1,827) | | | (1,839) | |
Balance at end of period | Balance at end of period | 296,639 | | | 280,636 | | | 296,639 | | | 280,636 | | | Balance at end of period | 314,873 | | | 296,639 | | | 314,873 | | | 296,639 | |
| Retained earnings | Retained earnings | | Retained earnings | |
Balance at beginning of period | Balance at beginning of period | 2,184,691 | | | 2,031,487 | | | 2,141,302 | | | 1,997,785 | | | Balance at beginning of period | 2,452,996 | | | 2,184,691 | | | 2,395,395 | | | 2,141,302 | |
Net income | Net income | 78,172 | | | 30,955 | | | 135,772 | | | 77,696 | | | Net income | 94,476 | | | 78,172 | | | 167,757 | | | 135,772 | |
Dividends declared on common stock | Dividends declared on common stock | (13,472) | | | (12,447) | | | (27,018) | | | (24,893) | | | Dividends declared on common stock | (15,689) | | | (13,472) | | | (31,369) | | | (27,018) | |
Adoption of accounting standards updates related to credit losses in 2020 and leases in 2019 | — | | | — | | | (665) | | | (593) | | | |
Adoption of accounting standards update related to credit losses in 2020 | | Adoption of accounting standards update related to credit losses in 2020 | — | | | — | | | — | | | (665) | |
Balance at end of period | Balance at end of period | 2,249,391 | | | 2,049,995 | | | 2,249,391 | | | 2,049,995 | | | Balance at end of period | 2,531,783 | | | 2,249,391 | | | 2,531,783 | | | 2,249,391 | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | | Accumulated other comprehensive loss | |
Balance at beginning of period | Balance at beginning of period | (297,697) | | | (272,431) | | | (259,742) | | | (268,808) | | | Balance at beginning of period | (291,806) | | | (297,697) | | | (260,953) | | | (259,742) | |
Other comprehensive loss | 337 | | | 7,058 | | | (37,618) | | | 3,435 | | | |
Other comprehensive income (loss) | | Other comprehensive income (loss) | 28,373 | | | 337 | | | (2,480) | | | (37,618) | |
Balance at end of period | Balance at end of period | (297,360) | | | (265,373) | | | (297,360) | | | (265,373) | | | Balance at end of period | (263,433) | | | (297,360) | | | (263,433) | | | (297,360) | |
| Treasury stock | Treasury stock | | Treasury stock | |
Balance at beginning of period | Balance at beginning of period | (1,160,453) | | | (1,137,035) | | | (1,149,411) | | | (1,125,525) | | | Balance at beginning of period | (1,196,221) | | | (1,160,453) | | | (1,189,683) | | | (1,149,411) | |
Net issuance of treasury stock for vested restricted stock units | Net issuance of treasury stock for vested restricted stock units | (274) | | | (72) | | | (4,382) | | | (11,582) | | | Net issuance of treasury stock for vested restricted stock units | (173) | | | (274) | | | (6,711) | | | (4,382) | |
Repurchases of common stock | Repurchases of common stock | — | | | — | | | (6,934) | | | — | | | Repurchases of common stock | 0 | | | 0 | | | 0 | | | (6,934) | |
Balance at end of period | Balance at end of period | (1,160,727) | | | (1,137,107) | | | (1,160,727) | | | (1,137,107) | | | Balance at end of period | (1,196,394) | | | (1,160,727) | | | (1,196,394) | | | (1,160,727) | |
Total stockholders' equity | Total stockholders' equity | $ | 1,089,694 | | | $ | 929,902 | | | $ | 1,089,694 | | | $ | 929,902 | | | Total stockholders' equity | $ | 1,388,580 | | | $ | 1,089,694 | | | $ | 1,388,580 | | | $ | 1,089,694 | |
| Dividends declared on common stock per share | Dividends declared on common stock per share | $ | 0.12 | | | $ | 0.11 | | | $ | 0.24 | | | $ | 0.22 | | | Dividends declared on common stock per share | $ | 0.14 | | | $ | 0.12 | | | $ | 0.28 | | | $ | 0.24 | |
| |
See accompanying notes.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 20202021 and 20192020 and for the
three and six months then ended is unaudited)
Note 1. Significant Accounting Policies
Basis of Presentation.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, 20192020 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, 2019.2020.
Recently Adopted Accounting Pronouncements. In June 2016,Effective with the Financial Accounting Standards Board, or FASB, issued an accounting standards update, or ASU, that amendsfirst quarter of 2021, we renamed our Closures segment as our Dispensing and Specialty Closures segment and our Plastic Containers segment as our Custom Containers segment, in each case to better capture the guidance on the accounting for credit losses on financial instruments. This new standard introduces an approach, based on expected losses,evolving nature of their products and our ongoing strategic focus. Each of these segments continues to estimate credit losses on certain types of financial instruments. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables. We adopted this new standard on January 1, 2020 using the transition method, which allowed us to recognize the effects of applying this standard as a cumulative effect to retained earnings as of January 1, 2020. As a resultconsist of the adoption of this standard, we reduced retained earnings by $0.7 million. The adoption of this standard did not have a material impact on our financial position, results ofsame operations or cash flows.as prior to it being renamed.
Note 2. Revenue
The following tables present our revenues disaggregated by reportable business 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 business segment were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Six Months Ended | | |
| June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 |
| (Dollars in thousands) | | | | | | |
Metal containers | $ | 597,191 | | | $ | 575,618 | | | $ | 1,105,709 | | | $ | 1,082,680 | |
Closures | 410,468 | | | 363,344 | | | 767,619 | | | 719,543 | |
Plastic containers | 168,811 | | | 154,201 | | | 333,526 | | | 318,071 | |
| $ | 1,176,470 | | | $ | 1,093,163 | | | $ | 2,206,854 | | | $ | 2,120,294 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 |
| (Dollars in thousands) |
Dispensing and Specialty Closures | $ | 545,768 | | | $ | 410,468 | | | $ | 1,055,120 | | | $ | 767,619 | |
Metal Containers | 624,534 | | | 597,191 | | | 1,178,615 | | | 1,105,709 | |
Custom Containers | 178,359 | | | 168,811 | | | 353,036 | | | 333,526 | |
| $ | 1,348,661 | | | $ | 1,176,470 | | | $ | 2,586,771 | | | $ | 2,206,854 | |
Revenues by geography were as follows:
| | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended | | Six Months Ended |
| | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 | | | June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 |
| | (Dollars in thousands) | | | | (Dollars in thousands) |
North America | North America | $ | 897,327 | | | $ | 858,565 | | | $ | 1,715,000 | | | $ | 1,669,332 | | | North America | $ | 968,497 | | | $ | 897,327 | | | $ | 1,866,899 | | | $ | 1,715,000 | |
Europe and other | Europe and other | 279,143 | | | 234,598 | | | 491,854 | | | 450,962 | | | Europe and other | 380,164 | | | 279,143 | | | 719,872 | | | 491,854 | |
| | $ | 1,176,470 | | | $ | 1,093,163 | | | $ | 2,206,854 | | | $ | 2,120,294 | | | | $ | 1,348,661 | | | $ | 1,176,470 | | | $ | 2,586,771 | | | $ | 2,206,854 | |
Our contract assets primarily consist of unbilled accounts receivable related to over time revenue recognition and were $92.6 million, $80.4 million, and $83.0 million as of June 30, 2021 and 2020 and December 31, 2020, respectively. Unbilled receivables are included in trade accounts receivable, net on our Condensed Consolidated Balance Sheets.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 20202021 and 20192020 and for the
three and six months then ended is unaudited)
Our contracts generally include standard commercial payment terms generally acceptable in each region. We do not provide financing with extended payment terms beyond generally standard commercial payment terms for the applicable industry. We have no significant obligations for refunds, warranties or similar obligations. Trade accounts receivable, net are shown separately on our Condensed Consolidated Balance Sheet. Contract assets are the result of the timing of revenue recognition, billings and cash collections. Our contract assets primarily consist of unbilled accounts receivable related to over time revenue recognition and were $80.4 million, $77.2 million, and $71.1 million as of June 30, 2020 and 2019 and December 31, 2019, respectively. Unbilled receivables are included in trade accounts receivable, net on our Condensed Consolidated Balance Sheet.
Note 3. Acquisitions
Cobra Plastics Acquisition
On February 4, 2020 we acquired Cobra Plastics, Inc., or Cobra Plastics, a manufacturer and seller of injection molded plastic closures for a wide variety of consumer products, with a particular focus on the aerosol overcap market. The purchase price for this acquisition of $39.8 million, net of cash acquired, was primarily funded with revolving loan borrowings under our amended and restated senior secured credit facility, or the Credit Agreement. For this acquisition, we applied the acquisition method of accounting and recognized assets acquired and liabilities assumed at fair value as of the acquisition date, and we recognized goodwill of $18.4 million and a customer relationship intangible asset of $11.5 million. Cobra Plastics' results of operations were included in our closures business since the acquisition date and were not significant since such date.
Albéa Dispensing Business Acquisition
On June 1, 2020, we acquired the dispensing operations of the Albéa Group, or the Albéa Dispensing Business, a leading global supplier of highly engineered pumps, sprayers and foam dispensing solutions to major branded consumer goods product companies in the beauty and personal care markets. It operates a global network of ten manufacturing facilities across North America, Europe, South America and Asia. This acquisition is strategically important for us, as it expands our closures franchise and, in particular, our dispensing systems operations. The Albéa Dispensing Business is included in our closures business as of the acquisition date.
We acquired the Albéa Dispensing Business for a purchase price in cash of $901.3 million, net of cash acquired. The purchase price is subject to adjustment for working capital, other current assets and current liabilities and net indebtedness. We incurred acquisition related costs for the Albéa Dispensing Business totaling $16.1 million and $18.3 million for the three and six months ended June 30, 2020, respectively, which are included in selling, general and administrative expenses in our Condensed Consolidated Statements of Income. We funded the purchase price for this acquisition with term and revolving loan borrowings under the Credit Agreement, including a delayed draw term loan of $900 million. See Note 8 for further information.
The initial purchase price has been allocated to assets acquired and liabilities assumed based on estimated fair values at the date of acquisition using valuation techniques including the income, cost and market approaches, primarily using Level 3 inputs (as defined in Note 9). The purchase price allocation is preliminary and subject to change pending a final valuation of the assets and liabilities, including property, plant and equipment and intangible assets, and the related tax impact of any adjustments to such valuations. In connection with this acquisition, we recorded a charge of $3.5 million related to the write-up of acquired inventory of the Albéa Dispensing Business as a result of purchase accounting.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2020 and 2019 and for the
three and six months then ended is unaudited)
The allocated fair value of assets acquired and liabilities assumed are summarized as follows (in thousands)
| | | | | |
Trade accounts receivable | $ | 48,177 | |
Inventories | 41,178 | |
Property, plant and equipment | 167,316 | |
Other intangible assets | 287,000 | |
Other assets | 42,593 | |
Trade accounts payable and accrued liabilities | (66,506) | |
Deferred income tax liabilities | (90,791) | |
Debt and other liabilities | (36,587) | |
Total identifiable net assets | 392,380 | |
Goodwill | 508,894 | |
Cash paid at closing, net of cash acquired | $ | 901,274 | |
Goodwill of $508.9 million consists largely of our increased capacity to serve our global customers and achieve operational synergies and has been assigned to our closures segment. A majority of the goodwill is not expected to be deductible for income tax purposes. Other intangible assets consist of customer relationships of $260.0 million with an estimated remaining life of 24 years and technology know-how of $27.0 million with an estimated remaining life of 8 years. Acquired property, plant and equipment are being depreciated on a straight-line basis with estimated remaining lives of up to 35 years.
Our consolidated results of operations for the three and six months ended June 30, 2020 included the results for the Albéa Dispensing Business since the acquisition date. Net sales from the Albéa Dispensing Business operations of $29.9 million were included in our Condensed Consolidated Statements of Income for the three and six months ended June 30, 2020.
Note 4.3. Rationalization Charges
We continually evaluate cost reduction opportunities across each of our businesses,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 business segment were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Three Months Ended | | | | Six Months Ended | | |
| | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 |
| | (Dollars in thousands) | | | | | | |
Metal containers | | $ | 1,153 | | | $ | 39,023 | | | $ | 3,116 | | | $ | 39,245 | |
Closures | | 700 | | | 248 | | | 1,442 | | | 5,908 | |
Plastic containers | | 89 | | | 46 | | | 183 | | | 247 | |
| | $ | 1,942 | | | $ | 39,317 | | | $ | 4,741 | | | $ | 45,400 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 |
| | (Dollars in thousands) |
Dispensing and Specialty Closures | | $ | 67 | | | $ | 700 | | | $ | 5,298 | | | $ | 1,442 | |
Metal Containers | | 225 | | | 1,153 | | | 5,246 | | | 3,116 | |
Custom Containers | | 62 | | | 89 | | | 167 | | | 183 | |
| | $ | 354 | | | $ | 1,942 | | | $ | 10,711 | | | $ | 4,741 | |
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2020 and 2019 and for the
three and six months then ended is unaudited)
Activity in reserves for our rationalization plans were as follows:
| | | Employee Severance and Benefits | | Plant Exit Costs | | Non-Cash Asset Write-Down | | Total | | Employee Severance and Benefits | | Plant Exit Costs | | Non-Cash Asset Write-Down | | Total |
| | | (Dollars in thousands) | | | | (Dollars in thousands) |
Balance at December 31, 2019 | | $ | 42,815 | | | $ | 898 | | | $ | — | | | $ | 43,713 | | |
Balance at December 31, 2020 | | Balance at December 31, 2020 | | $ | 41,005 | | | $ | 555 | | | $ | 0 | | | $ | 41,560 | |
Charged to expense | Charged to expense | | 2,715 | | | 1,506 | | | 520 | | | 4,741 | | Charged to expense | | 6,172 | | | (5) | | | 4,544 | | | 10,711 | |
Utilized and currency translation | Utilized and currency translation | | (3,887) | | | (1,752) | | | (520) | | | (6,159) | | Utilized and currency translation | | (3,258) | | | (263) | | | (4,544) | | | (8,065) | |
Balance at June 30, 2020 | | $ | 41,643 | | | $ | 652 | | | $ | — | | | $ | 42,295 | | |
Balance at June 30, 2021 | | Balance at June 30, 2021 | | $ | 43,919 | | | $ | 287 | | | $ | 0 | | | $ | 44,206 | |
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 June 30, 20202021 were recorded in our Condensed Consolidated Balance SheetsSheet as accrued liabilities of $4.5$7.9 million and other liabilities of $37.8$36.3 million. Exclusive of the footprint optimization plan for our metal container businessMetal Container segment and our resulting withdrawal from the Central States, Southeast and Southwest Areas Pension Plan, or the Central States Pension Plan, announced in 2019, remaining expenses and cash expenditures for our rationalization plans are expected to be $1.9$2.2 million and $3.4$7.0 million, respectively. Remaining expenses for the accretion of interest for the withdrawal liability related to the Central States Pension Plan are expected to average approximately $1.1 million per year and be recognized annually for the next twenty years,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 for the next twenty years, beginning in 2020.through 2040.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2021 and 2020 and for the
three and six months then ended is unaudited)
Note 5.4. 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, 2019 | $ | (139,102) | | | $ | (3,182) | | | $ | (117,458) | | | $ | (259,742) | |
Other comprehensive loss before reclassifications | (872) | | | (3,192) | | | (38,015) | | | (42,079) | |
Amounts reclassified from accumulated other comprehensive loss | 3,620 | | | 841 | | | — | | | 4,461 | |
Other comprehensive loss | 2,748 | | | (2,351) | | | (38,015) | | | (37,618) | |
Balance at June 30, 2020 | $ | (136,354) | | | $ | (5,533) | | | $ | (155,473) | | | $ | (297,360) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Unrecognized Net Defined Benefit Plan Costs | | Change in Fair Value of Derivatives | | Foreign Currency Translation | | Total |
| (Dollars in thousands) |
Balance at December 31, 2020 | $ | (168,604) | | | $ | (4,656) | | | $ | (87,693) | | | $ | (260,953) | |
Other comprehensive loss before reclassifications | 0 | | | 484 | | | (7,703) | | | (7,219) | |
Amounts reclassified from accumulated other comprehensive loss | 3,754 | | | 985 | | | 0 | | | 4,739 | |
Other comprehensive loss | 3,754 | | | 1,469 | | | (7,703) | | | (2,480) | |
Balance at June 30, 2021 | $ | (164,850) | | | $ | (3,187) | | | $ | (95,396) | | | $ | (263,433) | |
The amounts reclassified to earnings from the unrecognized net defined benefit plan costs component of accumulated other comprehensive loss for the three and six months ended June 30, 2020,2021 were net (losses) of $(2.5)$(2.6) million and $(4.9)$(5.2) million, respectively, excluding income tax benefits of $0.7 million and $1.3$1.4 million, respectively. For the three and six months ended June 30, 20202021, these net (losses) consisted of amortization of net actuarial (losses) of $(2.9)$(3.0) million and $(5.7)$(6.0) million and amortization of net prior service credit of $0.4 million and $0.8 million, respectively. Amortization of net actuarial losses and net prior service credit was recorded in other pension and postretirement income in our Condensed Consolidated Statements of Income. See Note 119 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 six months ended June 30, 20202021 were not significant.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2020 and 2019 and for the
three and six months then ended is unaudited)
Other comprehensive loss before reclassifications related to foreign currency translation for the three and six months ended June 30, 2020,2021 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 $10.2$29.1 million and $(22.7)$(22.6) million, respectively, (ii) foreign currency gains (losses) related to intra-entity foreign currency transactions that are of a long-term investment nature of $0.1$0.5 million and $(2.9)$0.9 million, respectively, and (iii) foreign currency (losses) gains related to our net investment hedges of $(15.6)$(5.2) million and $(16.2)$18.3 million, respectively, excluding an income tax benefitsbenefit (provision) of $3.6$1.3 million and $3.8$(4.3) million, respectively. See Note 97 for further discussion.
Note 6.5. Inventories
Inventories consisted of the following:
| | | | | | | | | | | | | | | | | |
| June 30, 2020 | | June 30, 2019 | | Dec. 31, 2019 |
| (Dollars in thousands) | | | | |
Raw materials | $ | 298,550 | | | $ | 271,396 | | | $ | 286,953 | |
Work-in-process | 165,505 | | | 141,268 | | | 134,417 | |
Finished goods | 499,799 | | | 523,145 | | | 355,337 | |
Other | 14,089 | | | 12,658 | | | 12,793 | |
| 977,943 | | | 948,467 | | | 789,500 | |
Adjustment to value inventory at cost on the LIFO method | (156,495) | | | (125,883) | | | (156,495) | |
| $ | 821,448 | | | $ | 822,584 | | | $ | 633,005 | |
Note 7. Goodwill and Other Intangibles
Changes in the carrying amount of goodwill were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Metal Containers | | Closures | | Plastic Containers | | Total |
| (Dollars in thousands) | | | | | | |
Balance at December 31, 2019 | $ | 113,463 | | | $ | 801,776 | | | $ | 226,984 | | | $ | 1,142,223 | |
Acquisitions | — | | | 527,270 | | | — | | | 527,270 | |
Currency translation | (84) | | | 35 | | | (830) | | | (879) | |
Balance at June 30, 2020 | $ | 113,379 | | | $ | 1,329,081 | | | $ | 226,154 | | | $ | 1,668,614 | |
| | | | | | | |
In connection with our acquisitions of Cobra Plastics and the Albéa Dispensing Business as discussed in Note 3, we recognized goodwill of $527.3 million.
| | | | | | | | | | | | | | | | | |
| June 30, 2021 | | June 30, 2020 | | Dec. 31, 2020 |
| (Dollars in thousands) |
Raw materials | $ | 302,719 | | | $ | 298,550 | | | $ | 270,066 | |
Work-in-process | 164,655 | | | 165,505 | | | 167,100 | |
Finished goods | 534,522 | | | 499,799 | | | 335,346 | |
Other | 15,497 | | | 14,089 | | | 14,610 | |
| 1,017,393 | | | 977,943 | | | 787,122 | |
Adjustment to value inventory at cost on the LIFO method | (109,588) | | | (156,495) | | | (109,588) | |
| $ | 907,805 | | | $ | 821,448 | | | $ | 677,534 | |
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2021 and 2020 and for the
three and six months then ended is unaudited)
Note 6. Long-Term Debt
Long-term debt consisted of the following:
| | | | | | | | | | | | | | | | | |
| June 30, 2021 | | June 30, 2020 | | Dec. 31, 2020 |
| (Dollars in thousands) |
Bank debt | | | | | |
Bank revolving loans | $ | 195,859 | | | $ | 354,000 | | | $ | 0 | |
U.S. term loans | 400,000 | | | 900,000 | | | 900,000 | |
| | | | | |
Other foreign bank revolving and term loans | 47,132 | | | 42,534 | | | 30,407 | |
Total bank debt | 642,991 | | | 1,296,534 | | | 930,407 | |
| | | | | |
| | | | | |
4¾% Senior Notes | 300,000 | | | 300,000 | | | 300,000 | |
3¼% Senior Notes | 770,835 | | | 728,520 | | | 795,307 | |
4⅛% Senior Notes | 600,000 | | | 600,000 | | | 600,000 | |
2¼% Senior Notes | 592,950 | | | 560,400 | | | 611,775 | |
1.4% Senior Secured Notes | 500,000 | | | 0 | | | 0 | |
Finance leases | 33,460 | | | 35,102 | | | 34,480 | |
Total debt - principal | 3,440,236 | | | 3,520,556 | | | 3,271,969 | |
Less unamortized debt issuance costs and debt discount | 22,984 | | | 22,713 | | | 20,716 | |
Total debt | 3,417,252 | | | 3,497,843 | | | 3,251,253 | |
Less current portion | 240,859 | | | 391,418 | | | 28,036 | |
| $ | 3,176,393 | | | $ | 3,106,425 | | | $ | 3,223,217 | |
At June 30, 2021, the current portion of long-term debt consisted of $195.9 million of bank revolving loans under our amended and restated senior secured credit facility, or the Credit Agreement, $43.1 million of other foreign bank revolving and term loans and $1.9 million of finance leases.
On February 1, 2021, we and certain of our subsidiaries entered into a Second Amendment to Amended and Restated Credit Agreement, or the Second Amendment, with certain lenders party thereto and Wells Fargo Bank, National Association, as administrative agent under the Credit Agreement. The Second Amendment amends the Credit Agreement to provide us with additional flexibility to issue new senior secured notes with related guarantees from our U.S. subsidiaries, which new senior secured notes and related guarantees may be secured on a pari passu basis with the U.S. Obligations by the U.S. Collateral (each as defined in the Second Amendment). The Second Amendment also makes minor technical changes and allows for certain additional internal corporate reorganizations.
1.4% SENIOR SECURED NOTES
On February 10, 2021, we issued $500.0 million aggregate principal amount of our 1.4% Senior Secured Notes due 2026, or the 1.4% Notes, at 99.945 percent of their principal amount, in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended. The proceeds from the sale of the 1.4% Notes were $499.7 million. We used the proceeds from the sale of the 1.4% Notes to prepay $500.0 million of our outstanding term loans under the Credit Agreement. We paid the initial purchasers’ discount and offering expenses related to the sale of the 1.4% Notes with cash on hand. As a result of this prepayment, we recorded a pre-tax charge for the loss on early extinguishment of debt of $0.9 million during the first quarter of 2021 for the write-off of unamortized debt issuance costs.
The 1.4% Notes are guaranteed on a senior secured basis by our U.S. subsidiaries that guarantee the Credit Agreement. The 1.4% Notes are not guaranteed by any of our subsidiaries that do not guarantee the Credit Agreement, any of our foreign subsidiaries or any of our non-wholly owned subsidiaries. The 1.4% Notes and related guarantees are secured by pledges of equity interests, or the Collateral, that are owned by us and by each subsidiary guarantor, which equity interests are the same equity interests pledged to secure the obligations of U.S. borrowers under the Credit Agreement. The 1.4% Notes will share equally in the Collateral with the Credit Agreement. The guarantee of each such subsidiary guarantor will be released to the
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 20202021 and 20192020 and for the
three and six months then ended is unaudited)
The components of other intangible assets, net were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2020 | | | | December 31, 2019 | | |
| Gross Amount | | Accumulated Amortization | | Gross Amount | | Accumulated Amortization |
| (Dollars in thousands) | | | | | | |
Definite-lived intangibles: | | | | | | | |
Customer relationships | $ | 688,391 | | | $ | (126,737) | | | $ | 422,042 | | | $ | (116,575) | |
Other | 68,075 | | | (26,713) | | | 39,447 | | | (22,439) | |
| 756,466 | | | (153,450) | | | 461,489 | | | (139,014) | |
Indefinite-lived intangibles: | | | | | | | |
Trade names | 32,140 | | | — | | | 32,140 | | | — | |
| $ | 788,606 | | | $ | (153,450) | | | $ | 493,629 | | | $ | (139,014) | |
| | | | | | | |
In connection with our acquisitions of Cobra Plastics and the Albéa Dispensing Business as discussed in Note 3, we recognized intangible assets for customer relationships of $271.5 million and technology know-how of $27.0 million.
Amortization expense was $8.1 million and $14.9 million for the three and six months ended June 30, 2020, respectively, and $6.8 million and $13.6 million for the three and six months ended June 30, 2019, respectively. Amortization expense is expected to be $35.8 million, $40.4 million, $39.3 million, $39.2 million and $38.3 million for the years ended December 31, 2020 through 2024, respectively.
Note 8. Long-Term Debt
Long-term debt consisted of the following:
| | | | | | | | | | | | | | | | | |
| June 30, 2020 | | June 30, 2019 | | Dec. 31, 2019 |
| (Dollars in thousands) | | | | |
Bank debt | | | | | |
Bank revolving loans | $ | 354,000 | | | $ | 506,000 | | | $ | — | |
U.S. term loans | 900,000 | | | 800,000 | | | 760,000 | |
Canadian term loans | — | | | 16,133 | | | 4,703 | |
Other foreign bank revolving and term loans | 42,534 | | | 39,269 | | | 31,127 | |
Total bank debt | 1,296,534 | | | 1,361,402 | | | 795,830 | |
| | | | | |
5½% Senior Notes | — | | | 300,000 | | | — | |
4¾% Senior Notes | 300,000 | | | 300,000 | | | 300,000 | |
3¼% Senior Notes | 728,520 | | | 739,245 | | | 729,755 | |
4⅛% Senior Notes | 600,000 | | | — | | | 400,000 | |
2¼% Senior Notes | 560,400 | | | — | | | — | |
Finance leases | 35,102 | | | 22,219 | | | 33,288 | |
Total debt - principal | 3,520,556 | | | 2,722,866 | | | 2,258,873 | |
Less unamortized debt issuance costs and debt discount | 22,713 | | | 11,875 | | | 14,452 | |
Total debt | 3,497,843 | | | 2,710,991 | | | 2,244,421 | |
Less current portion | 391,418 | | | 886,458 | | | 29,813 | |
| $ | 3,106,425 | | | $ | 1,824,533 | | | $ | 2,214,608 | |
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2020 and 2019 and for the
three and six months then ended is unaudited)
At June 30, 2020, the current portion of long-term debt consisted of $354.0 million of bank revolving loans underextent such subsidiary no longer guarantees the Credit Agreement $35.6 millionand in certain other circumstances, and the Collateral pledged by such subsidiary guarantor will also be released upon the release of other foreign bank revolving and term loans and $1.8 million of finance leases.
On February 26, 2020, we issued (i) an additional $200 million aggregate principal amount of our 4⅛% Senior Notes due 2028, or the 4⅛% Notes, at 99.5 percent of their principal amount, plus accrued and unpaid interest from November 12, 2019, and €500 million aggregate principal amount of our 2¼% Senior Notes due 2028, or the 2¼% Notes, at 100 percent of their principal amount. We used the net proceeds from these issuances and revolving loan borrowings under the Credit Agreement to prepay all of our outstanding U.S. term loans under the Credit Agreement at that time. As a result of this prepayment, we recorded a pre-tax charge for the loss on early extinguishment of debt of $1.5 million during the first quarter of 2020 for the write-off of unamortized debt issuance costs.
2¼% SENIOR NOTES
such subsidiary guarantor’s guarantee.
The 2¼%1.4% Notes and related guarantees are general unsecuredsenior secured obligations of Silgan, ranking equalus and the subsidiary guarantors. The 1.4% Notes and related guarantees rank equally in right of payment with all of our and the subsidiary guarantors’ existing and future unsecured unsubordinatedsenior indebtedness, including under the Credit Agreement and our 4¾% Senior Notes due 2025, or the 4¾% Notes, our 3¼% Senior Notes due 2025, or the 3¼% Notes, andour 4⅛% Senior Notes due 2028, or the 4⅛% Notes, and aheadour 2¼% Senior Notes due 2028, or the 2¼% Notes; are senior in right of payment to all of our and the subsidiary guarantors’ future indebtedness that is by its terms expressly subordinated in right of payment to the 1.4% Notes; rank equally in right of payment to all of our and the subsidiary guarantors’ existing and future senior secured indebtedness (including indebtedness under the Credit Agreement) that is secured by the Collateral on a first-priority basis, to the extent of the value of the Collateral; rank effectively senior to all of our and the subsidiary guarantors’ existing and future unsecured indebtedness and indebtedness secured on a junior basis, in each case to the extent of the value of the Collateral; rank effectively junior to all existing and future indebtedness that is secured by liens on assets that do not constitute a part of the Collateral, to the extent of the value of such assets; and are structurally subordinated to all existing and future indebtedness and other liabilities of each of our existing and future subordinated debt, if any. The 2¼% Notes are effectively subordinated to Silgan’s secured debt tosubsidiaries that do not guarantee the extent of the assets securing such debt and structurally subordinated to all obligations of subsidiaries of Silgan.1.4% Notes.
TheAs a result of the guarantees by the subsidiary guarantors of the 1.4% Notes, such subsidiaries were also required to guarantee, and have now guaranteed, on a senior unsecured basis the 4¾% Notes, the 3¼% Notes, the 4⅛% Notes and the 2¼% Notes willpursuant to supplemental indentures to the indenture for the 4¾% Notes and the 3¼% Notes, the indenture for the 4⅛% Notes and the indenture for the 2¼% Notes.
The 1.4% Notes are not, and are not required to be, registered under the Securities Act of 1933, as amended.
The 1.4% Notes mature on JuneApril 1, 2028.2026. Interest on the 2¼%1.4% Notes will be payable semi-annually in cash on January 15April 1 and July 15October 1 of each year, beginning on July 15, 2020.October 1, 2021. The 2¼%1.4% Notes were issued pursuant to an indenture by and among Silgan, certain of our U.S. subsidiaries and Wells Fargo Bank, National Association, as trustee Elavon Financial Services DAC, UK Branch, as paying agent, and Elavon Financial Services DAC, as registrar and transfercollateral agent, which indenture contains covenants that are generally less restrictive than those in the Credit Agreement and substantially similar to the covenants in the indenture for the 4¾% Notes and the 3¼% Notes, and the indenture for the 4⅛% Notes and the indenture for the 2¼% Notes.
The 2¼%Prior to March 1, 2026 (one month prior to the maturity date of the 1.4% Notes, areor the Par Call Date) the 1.4% Notes will be redeemable at our option, in whole or in part, at any time after March 1, 2023, initially at 101.125a redemption price equal to the greater of (i) 100 percent of theirthe principal amount of the 1.4% Notes to be redeemed and (ii) the principal amount of the 1.4% Notes plus a “make-whole” amount, plus, in each case, accrued and unpaid interest thereon to the redemption date, declining ratably to 100 percent of their principal amount, plus accrued and unpaid interest to the redemption date, ondate. On or after March 1, 2025.
In addition, prior to March 1, 2023, we may redeem up to 35 percent of the aggregate principal amount ofPar Call Date, the 2¼%1.4% Notes with the proceeds of certain equity offerings at a redemption price of 102.25 percent of their principal amount, plus accrued and unpaid interest to the date of redemption. We may also redeem the 2¼% Notes, in whole or in part, prior to March 1, 2023will be redeemable at a redemption price equal to 100 percent of theirthe aggregate principal amount plus a make-whole premium as provided in the indenture for the 2¼%of any 1.4% Notes together withbeing redeemed, plus accrued and unpaid interest thereon to the date of redemption. redemption date.
We will be required to make an offer to repurchase the 2¼%1.4% Notes at a repurchase price equal to 101 percent of their principal amount, plus accrued and unpaid interest to the date of repurchase, upon the occurrence of a change of control repurchase event as provided in the indenture for the 2¼%1.4% Notes.
Incremental U.S. Term Loans
On April 17, 2020, we and certain of our subsidiaries entered into an Incremental Term Loan Commitment Agreement, or the Incremental Term Loan Commitment Agreement, with the lenders thereunder and Wells Fargo Bank, National Association, as Administrative Agent and a lender. The Incremental Term Loan Commitment Agreement was entered into pursuant to the Credit Agreement and provided for the lenders thereunder to lend to us, on a delayed draw basis, $900 million of Incremental U.S. Term Loans, or the Incremental U.S. Term Loans, to fund the purchase price for the acquisition of the Albéa Dispensing Business. On June 1, 2020, we borrowed $900 million of Incremental U.S. Term Loans under the Incremental Term Loan Commitment Agreement to fund the purchase price for the acquisition of the Albéa Dispensing Business.
The Incremental U.S. Term Loans mature on May 30, 2024 and are repayable in installments of $90 million on each of December 31, 2021, 2022 and 2023, with the remaining outstanding principal balance to be repaid on May 30, 2024.
The Incremental U.S. Term Loans initially have an Applicable Margin (as defined in the Credit Agreement) of 1.75 percent per annum in the case of Eurodollar Rate Loans (as defined in the Credit Agreement) and 0.75 percent per annum in the case of Base Rate Loans (as defined in the Credit Agreement), in both cases until the delivery of our financial statements for the fiscal quarter ending June 30, 2020. The Applicable Margin will vary between 1.25 percent to 1.75 percent per annum for Eurodollar
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 20202021 and 20192020 and for the
three and six months then ended is unaudited)
Rate Loans and between 0.25 percent to 0.75 percent per annum for Base Rate Loans, in both cases based on our Total Net Leverage Ratio (as defined in the Credit Agreement).
The Incremental U.S. Term Loans are guaranteed by the US Guarantors (as defined in the Credit Agreement) and secured on a pari passu basis by the same collateral that secures our outstanding loans under the Credit Agreement.
Note 9.7. 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 June 30, 2020:2021:
| | | | | | | | | | | |
| Carrying Amount | | Fair Value |
| (Dollars in thousands) | | |
Assets: | | | |
Cash and cash equivalents | $ | 191,082 | | | $ | 191,082 | |
| | | |
| | | |
Liabilities: | | | |
Bank debt | $ | 1,296,534 | | | $ | 1,296,534 | |
| | | |
4¾% Senior Notes | 300,000 | | | 303,813 | |
3¼% Senior Notes | 728,520 | | | 734,592 | |
4⅛% Senior Notes | 599,035 | | | 594,750 | |
2¼% Senior Notes | 560,400 | | | 540,450 | |
Derivative instruments (accrued and other liabilities) | 7,259 | | | 7,259 | |
| | | | | | | | | | | |
| Carrying Amount | | Fair Value |
| (Dollars in thousands) |
Assets: | | | |
Cash and cash equivalents | $ | 164,821 | | | $ | 164,821 | |
| | | |
| | | |
Liabilities: | | | |
Bank debt | $ | 642,991 | | | $ | 642,991 | |
| | | |
4¾% Notes | 300,000 | | | 304,890 | |
3¼% Notes | 770,835 | | | 777,850 | |
4⅛% Notes | 600,000 | | | 622,500 | |
2¼% Notes | 592,950 | | | 597,397 | |
1.4% Notes | 500,000 | | | 495,000 | |
| | | |
Fair Value Measurements
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). GAAP classifies the inputs used to measure fair value into a hierarchy consisting of three levels. Level 1 inputs represent unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs represent unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability. Level 3 inputs represent unobservable inputs for the asset or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Financial Instruments Measured at Fair Value
The financial assets and liabilities that were measured on a recurring basis at June 30, 20202021 consisted of our cash and cash equivalents and derivative instruments. We measured the fair value of cash and cash equivalents using Level 1 inputs. We measured the fair value of our derivative instruments using the income approach. The fair value of our derivative instruments reflects the estimated amounts that we would pay or receive based on the present value of the expected cash flows derived from market interest rates and prices. As such, these derivative instruments were classified within Level 2.
Financial Instruments Not Measured at Fair Value
Our bank debt, 4¾% Senior Notes, 3¼% Senior Notes, 4⅛% SeniorNotes, 2¼% Notes and 2¼% Senior1.4% Notes were recorded at historical amounts in our Condensed Consolidated Balance Sheets, as we have not elected to measure them at fair value. We measured the fair value of our variable rate bank debt using the market approach based on Level 2 inputs. Fair values of the 4¾% Senior
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2020 and 2019 and for the
three and six months then ended is unaudited)
Notes, 3¼% Senior Notes, 4⅛% SeniorNotes, 2¼% Notes and 2¼% Senior1.4% Notes were estimated based on quoted market prices, a Level 1 input.
Derivative Instruments and Hedging Activities
Our derivative financial instruments were recorded in the Condensed Consolidated Balance Sheets at their fair values. Changes in fair values of derivatives are recorded in each period in earnings or comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2021 and 2020 and for the
three and six months then ended is unaudited)
We utilize certain derivative financial instruments to manage a portion of our interest rate, foreign currency exchange rate and natural gas cost exposures. We generally limit our use of derivative financial instruments to interest rate, foreign currency exchange rate and natural gas swap agreements. We do not engage in trading or other speculative uses of these financial instruments. For a financial instrument to qualify as a hedge, we must be exposed to interest rate, foreign currency exchange rate or price risk, and the financial instrument must reduce the exposure and be designated as a hedge. Financial instruments qualifying for hedge accounting must maintain a high correlation between the hedging instrument and the item being hedged, both at inception and throughout the hedged period. The notional principal amounts outstanding under foreign currency exchange rate agreements and natural gas swap agreements were not significant as of June 30, 2021.
WeIn addition, we also utilize certain internal hedging strategies to minimize our foreign currency exchange rate risk. Net investment hedges that qualify for hedge accounting result in the recognition of foreign currency gains or losses, net of tax, in accumulated other comprehensive loss. We generally do not utilize external derivative financial instruments to manage our foreign currency exchange rate risk.
Interest Rate Swap Agreements
We have entered into two U.S. dollar interest rate swap agreements, each for $50.0 million notional principal amount, to manage a portion of our exposure to interest rate fluctuations. These agreements have a fixed rate of 2.878 percent and mature on March 24, 2023. The difference between amounts to be paid or received on our interest rate swap agreements is recorded in interest and other debt expense in our Condensed Consolidated Statements of Income and was not significant for the three and six month periodsmonths ended June 30, 2020.2021. These agreements are with a financial institution which is expected to fully perform under the terms thereof. The total fair value of our interest rate swap agreements in effect at June 30, 2020 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 and six month periods ended June 30, 2020. 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 June 30, 20202021 was not significant.
Foreign Currency Exchange Rate Risk
In an effort to minimize our foreign currency exchange rate risk, in addition to limited foreign currency exchange rate derivative financial instruments, we have financed acquisitions of foreign operations primarily with borrowings denominated in Euros and Canadian dollars. In addition, where available, we have borrowed funds in local currency or implemented certain internal hedging strategies to minimize our foreign currency exchange rate risk related to foreign operations. We have designatedoperations, including net investment hedges related to the 3¼% Senior Notes and the 2¼% Senior Notes which are Euro denominated, as net investment hedges.denominated. Foreign currency losses(losses) gains related to our net investment hedges included in accumulated other comprehensive loss for the three and six months ended June 30, 20202021 were $(15.6)$(5.2) million and $(16.2)$18.3 million, respectively.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2021 and 2020 and for the
three and six months then ended is unaudited)
Note 10.8. Commitments and Contingencies
A competition authority in Germany commenced an antitrust investigation in 2015 involving the industry association for metal packaging in Germany and its members, including our metal containerclosures and closuresmetal container subsidiaries in Germany. At the end of April 2018, the European Commission commenced an antitrust investigation involving the metal packaging industry in Europe including our metal containerclosures and closuresmetal container subsidiaries, which should effectively close out the investigation in Germany. Given
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2020 and 2019 and for the
three and six months then ended is unaudited)
the current stage of the investigation, we cannot reasonably assess what actions may result from these investigations or estimate what costs we may incur as a result thereof.
We are a party to other legal proceedings, contract disputes and claims arising in the ordinary course of our business. We are not a party to, and none of our properties are subject to, any pending legal proceedings which could have a material adverse effect on our business or financial condition.
Note 11.9. Retirement Benefits
The components of the net periodic pension benefit credit were as follows:
| | | Three Months Ended | | | Six Months Ended | | | Three Months Ended | | Six Months Ended |
| | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 | | June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 |
| | (Dollars in thousands) | | | (Dollars in thousands) |
Service cost | Service cost | $ | 3,489 | | | $ | 3,254 | | | $ | 6,975 | | | $ | 6,512 | | Service cost | $ | 3,789 | | | $ | 3,489 | | | $ | 7,577 | | | $ | 6,975 | |
Interest cost | Interest cost | 5,710 | | | 7,043 | | | 11,420 | | | 14,092 | | Interest cost | 4,355 | | | 5,710 | | | 8,709 | | | 11,420 | |
Expected return on plan assets | Expected return on plan assets | (17,993) | | | (15,112) | | | (35,987) | | | (30,225) | | Expected return on plan assets | (19,850) | | | (17,993) | | | (39,698) | | | (35,987) | |
Amortization of prior service cost | Amortization of prior service cost | 56 | | | 21 | | | 111 | | | 40 | | Amortization of prior service cost | 58 | | | 56 | | | 116 | | | 111 | |
Amortization of actuarial losses | Amortization of actuarial losses | 2,934 | | | 4,121 | | | 5,869 | | | 8,240 | | Amortization of actuarial losses | 3,028 | | | 2,934 | | | 6,054 | | | 5,869 | |
| Net periodic benefit credit | Net periodic benefit credit | $ | (5,804) | | | $ | (673) | | | $ | (11,612) | | | $ | (1,341) | | Net periodic benefit credit | $ | (8,620) | | | $ | (5,804) | | | $ | (17,242) | | | $ | (11,612) | |
The components of the net periodic other postretirement benefit credit were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 |
| (Dollars in thousands) |
Service cost | $ | 28 | | | $ | 25 | | | $ | 56 | | | $ | 48 | |
Interest cost | 95 | | | 141 | | | 190 | | | 283 | |
Amortization of prior service credit | (457) | | | (484) | | | (913) | | | (967) | |
Amortization of actuarial gains | (47) | | | (69) | | | (95) | | | (139) | |
Net periodic benefit credit | $ | (381) | | | $ | (387) | | | $ | (762) | | | $ | (775) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Six Months Ended | | |
| June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 |
| (Dollars in thousands) | | | | | | |
Service cost | $ | 25 | | | $ | 22 | | | $ | 48 | | | $ | 44 | |
Interest cost | 141 | | | 184 | | | 283 | | | 369 | |
Amortization of prior service credit | (484) | | | (581) | | | (967) | | | (1,163) | |
Amortization of actuarial gains | (69) | | | (166) | | | (139) | | | (333) | |
Net periodic benefit credit | $ | (387) | | | $ | (541) | | | $ | (775) | | | $ | (1,083) | |
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2020 and 2019 and for the
three and six months then ended is unaudited)
Note 12.10. 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 20182019 tax year with no change to our filed federal income tax return. We have been accepted into the Compliance Assurance Program for the 20192020 and 20202021 tax years which provides for the review by the IRS of tax matters relating to our tax return prior to filing.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2021 and 2020 and for the
three and six months then ended is unaudited)
Note 13.11. Treasury Stock
On October 17, 2016, our Board of Directors authorized the repurchase by us of up to an aggregate of $300.0 million of our common stock by various means from time to time through and including December 31, 2021. DuringWe did not repurchase any shares of our common stock pursuant to this authorization during the six months ended June 30, 2020, we repurchased an aggregate of 259,461 shares of our common stock at an average price per share of $26.71, for a total purchase price of $6.9 million.2021. At June 30, 2020,2021, we had approximately $105.6$76.6 million remaining under this authorization for the repurchase of our common stock.
During the first six months of 2020,2021, we issued 582,151573,232 treasury shares which had an average cost of $3.16$3.19 per share for restricted stock units that vested during the period. In accordance with the Silgan Holdings Inc. Amended and Restated 2004 Stock Incentive Plan, we repurchased 217,325222,146 shares of our common stock at an average cost of $28.63$38.44 to satisfy minimum employee withholding tax requirements resulting from the vesting of such restricted stock units.
We account for treasury shares using the first-in, first-out (FIFO) cost method. As of June 30, 2020, 64,226,6672021, 64,704,383 shares of our common stock were held in treasury.
Note 14.12. Stock-Based Compensation
We currently have one stock-based compensation plan in effect under which we have issued options and restricted stock units to our officers, other key employees and outside directors. During the first six months of 2020, 423,6222021, 359,469 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 $12.5$13.9 million, which is being amortized ratably over the respective vesting period from the grant date.
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2020 and 2019 and for the
three and six months then ended is unaudited)
Note 15. Business Segment Information
Reportable business segment information was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Metal Containers | | Closures | | Plastic Containers | | Corporate | | Total |
| (Dollars in thousands) | | | | | | | | |
Three Months Ended June 30, 2020 | | | | | | | | | |
Net sales | $ | 597,191 | | | $ | 410,468 | | | $ | 168,811 | | | $ | — | | | $ | 1,176,470 | |
Depreciation and amortization(1) | 20,545 | | | 22,026 | | | 9,352 | | | 42 | | | 51,965 | |
Rationalization charges | 1,153 | | | 700 | | | 89 | | | — | | | 1,942 | |
Segment income | 71,782 | | | 58,581 | | | 22,987 | | | (22,116) | | | 131,234 | |
| | | | | | | | | |
Three Months Ended June 30, 2019 | | | | | | | | | |
Net sales | $ | 575,618 | | | $ | 363,344 | | | $ | 154,201 | | | $ | — | | | $ | 1,093,163 | |
Depreciation and amortization(1) | 21,437 | | | 21,145 | | | 9,336 | | | 39 | | | 51,957 | |
Rationalization charges | 39,023 | | | 248 | | | 46 | | | — | | | 39,317 | |
Segment income | 14,029 | | | 46,857 | | | 13,410 | | | (5,697) | | | 68,599 | |
| | | | | | | | | |
Six Months Ended June 30, 2020 | | | | | | | | | |
Net sales | $ | 1,105,709 | | | $ | 767,619 | | | $ | 333,526 | | | $ | — | | | $ | 2,206,854 | |
Depreciation and amortization(1) | 41,026 | | | 42,150 | | | 18,840 | | | 79 | | | 102,095 | |
Rationalization charges | 3,116 | | | 1,442 | | | 183 | | | — | | | 4,741 | |
Segment income | 119,261 | | | 103,810 | | | 45,032 | | | (34,728) | | | 233,375 | |
| | | | | | | | | |
Six Months Ended June 30, 2019 | | | | | | | | | |
Net sales | $ | 1,082,680 | | | $ | 719,543 | | | $ | 318,071 | | | | | $ | 2,120,294 | |
Depreciation and amortization(1) | 42,543 | | | 41,498 | | | 18,153 | | | 80 | | | 102,274 | |
Rationalization charges | 39,245 | | | 5,908 | | | 247 | | | | | 45,400 | |
Segment income | 52,926 | | | 87,113 | | | 25,476 | | | (10,174) | | | 155,341 | |
_____________
(1)Depreciation and amortization excludes amortization of debt discount and debt issuance costs of $1.1 million and $2.1 million for the three and six months ended June 30, 2020, respectively, and debt issuance costs of $0.9 million and $1.8 million for the three and six months ended June 30, 2019, respectively.
Total segment income is reconciled to income before income taxes as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Six Months Ended | | |
| June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 |
| (Dollars in thousands) | | | | | | |
Total segment income | $ | 131,234 | | | $ | 68,599 | | | $ | 233,375 | | | $ | 155,341 | |
Interest and other debt expense | 25,837 | | | 28,401 | | | 50,807 | | | 55,505 | |
Income before income taxes | $ | 105,397 | | | $ | 40,198 | | | $ | 182,568 | | | $ | 99,836 | |
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 20202021 and 20192020 and for the
three and six months then ended is unaudited)
Note 13. Segment Information
Reportable segment information was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Dispensing and Specialty Closures | | Metal Containers | | Custom Containers | | Corporate | | Total |
| (Dollars in thousands) |
Three Months Ended June 30, 2021 | | | | | | | | | |
Net sales | $ | 545,768 | | | $ | 624,534 | | | $ | 178,359 | | | $ | 0 | | | $ | 1,348,661 | |
Depreciation and amortization(1) | 29,101 | | | 21,329 | | | 9,632 | | | 42 | | | 60,104 | |
Rationalization charges | 67 | | | 225 | | | 62 | | | 0 | | | 354 | |
Segment income | 73,836 | | | 58,635 | | | 27,244 | | | (6,761) | | | 152,954 | |
| | | | | | | | | |
Three Months Ended June 30, 2020 | | | | | | | | | |
Net sales | $ | 410,468 | | | $ | 597,191 | | | $ | 168,811 | | | $ | 0 | | | $ | 1,176,470 | |
Depreciation and amortization(1) | 22,026 | | | 20,545 | | | 9,352 | | | 42 | | | 51,965 | |
Rationalization charges | 700 | | | 1,153 | | | 89 | | | 0 | | | 1,942 | |
Segment income | 58,581 | | | 71,782 | | | 22,987 | | | (22,116) | | | 131,234 | |
| | | | | | | | | |
Six Months Ended June 30, 2021 | | | | | | | | | |
Net sales | $ | 1,055,120 | | | $ | 1,178,615 | | | $ | 353,036 | | | $ | 0 | | | $ | 2,586,771 | |
Depreciation and amortization(1) | 57,991 | | | 42,578 | | | 19,005 | | | 81 | | | 119,655 | |
Rationalization charges | 5,298 | | | 5,246 | | | 167 | | | 0 | | | 10,711 | |
Segment income | 139,481 | | | 104,249 | | | 51,730 | | | (15,957) | | | 279,503 | |
| | | | | | | | | |
Six Months Ended June 30, 2020 | | | | | | | | | |
Net sales | $ | 767,619 | | | $ | 1,105,709 | | | $ | 333,526 | | | $ | 0 | | | $ | 2,206,854 | |
Depreciation and amortization(1) | 42,150 | | | 41,026 | | | 18,840 | | | 79 | | | 102,095 | |
Rationalization charges | 1,442 | | | 3,116 | | | 183 | | | 0 | | | 4,741 | |
Segment income | 103,810 | | | 119,261 | | | 45,032 | | | (34,728) | | | 233,375 | |
_____________
(1)Depreciation and amortization excludes amortization of debt discount and debt issuance costs of $1.4 million and $1.1 million for the three months ended June 30, 2021 and 2020, respectively and $2.7 million and $2.1 million for the six months ended June 30, 2021 and 2020, respectively.
Total segment income is reconciled to income before income taxes as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 |
| | (Dollars in thousands) |
Total segment income | | $ | 152,954 | | | $ | 131,234 | | | $ | 279,503 | | | $ | 233,375 | |
Interest and other debt expense | | 26,406 | | | 25,837 | | | 53,712 | | | 50,807 | |
Income before income taxes | | $ | 126,548 | | | $ | 105,397 | | | $ | 225,791 | | | $ | 182,568 | |
Sales and segment income of our metal container business and part of our closures businessDispensing and Specialty Closures segment and our Metal Container segment are dependent, in part, upon fruit and vegetable harvests. 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
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2021 and 2020 and for the
three and six months then ended is unaudited)
experienced higher unit sales volume in the third quarter of our fiscal year and generated a disproportionate amount of our annual segment income during that quarter.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statements included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q that are not historical facts are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and Securities Exchange Act of 1934, as amended. Such forward-looking statements are made based upon management’s expectations and beliefs concerning future events impacting us and therefore involve a number of uncertainties and risks, including, but not limited to, those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 20192020 and in our other filings with the Securities and Exchange Commission. As a result, the actual results of our operations or our financial condition could differ materially from those expressed or implied in these forward-looking statements.
General
We are a leading manufacturer of sustainable rigid packaging solutions for consumer goods products. We currently produce dispensing and specialty closures for food, beverage, health care, garden, home, personal care and beauty products; steel and aluminum containers for human and pet food and general line products; metal and plastic closures and dispensing systems for food, beverage, health care, garden, home, personal care and beauty products; and custom designed plastic containers for personal care, food, health care, pharmaceutical, household and industrial chemical, pet food and care, agricultural, automotive and marine chemical products. We are a leading worldwide manufacturer of dispensing and specialty closures, a leading manufacturer of metal containers in North America and Europe, a leading worldwide manufacturer of metal and plastic closures and dispensing systems and a leading manufacturer of custom plastic containers in North America for a variety of markets, including the personal care, food, health care and household and industrial chemical markets.
Our objective is to increase shareholder value by efficiently deploying capital and management resources to grow our business, reduce operating costs and build sustainable competitive positions, or franchises, and to complete acquisitions that generate attractive cash returns. We have grown our net sales and income from operations largely through acquisitions but also through internal growth, and we continue to evaluate acquisition opportunities in the consumer goods packaging market. If acquisition opportunities are not identified over a longer period of time, we may use our cash flow to repay debt, repurchase shares of our common stock or increase dividends to our stockholders or for other permitted purposes.
RESULTS OF OPERATIONS
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 | | | Three Months Ended | | Six Months Ended |
| | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 | | June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 |
Net sales | Net sales | | | | | | | Net sales | | | | | |
Metal containers | 50.8 | % | | 52.7 | % | | 50.1 | % | | 51.1 | % | |
Closures | 34.9 | | | 33.2 | | | 34.8 | | | 33.9 | | |
Plastic containers | 14.3 | | | 14.1 | | | 15.1 | | | 15.0 | | |
Dispensing and Specialty Closures | | Dispensing and Specialty Closures | 40.5 | % | | 34.9 | % | | 40.8 | % | | 34.8 | % |
Metal Containers | | Metal Containers | 46.3 | | | 50.8 | | | 45.6 | | | 50.1 | |
Custom Containers | | Custom Containers | 13.2 | | | 14.3 | | | 13.6 | | | 15.1 | |
Consolidated | Consolidated | 100.0 | | | 100.0 | | | 100.0 | | | 100.0 | | Consolidated | 100.0 | | | 100.0 | | | 100.0 | | | 100.0 | |
Cost of goods sold | Cost of goods sold | 80.9 | | | 83.2 | | | 81.5 | | | 83.5 | | Cost of goods sold | 82.6 | | | 80.9 | | | 82.4 | | | 81.5 | |
Gross profit | Gross profit | 19.1 | | | 16.8 | | | 18.5 | | | 16.5 | | Gross profit | 17.4 | | | 19.1 | | | 17.6 | | | 18.5 | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 8.5 | | | 7.3 | | | 8.6 | | | 7.4 | | Selling, general and administrative expenses | 7.0 | | | 8.5 | | | 7.4 | | | 8.6 | |
Rationalization charges | Rationalization charges | 0.2 | | | 3.6 | | | 0.2 | | | 2.2 | | Rationalization charges | — | | | 0.2 | | | 0.4 | | | 0.2 | |
Other pension and postretirement income | Other pension and postretirement income | (0.8) | | | (0.4) | | | (0.9) | | | (0.4) | | Other pension and postretirement income | (0.9) | | | (0.8) | | | (1.0) | | | (0.9) | |
Income before interest and income taxes | Income before interest and income taxes | 11.2 | | | 6.3 | | | 10.6 | | | 7.3 | | Income before interest and income taxes | 11.3 | | | 11.2 | | | 10.8 | | | 10.6 | |
Interest and other debt expense | Interest and other debt expense | 2.2 | | | 2.6 | | | 2.3 | | | 2.6 | | Interest and other debt expense | 1.9 | | | 2.2 | | | 2.1 | | | 2.3 | |
Income before income taxes | Income before income taxes | 9.0 | | | 3.7 | | | 8.3 | | | 4.7 | | Income before income taxes | 9.4 | | | 9.0 | | | 8.7 | | | 8.3 | |
Provision for income taxes | Provision for income taxes | 2.3 | | | 0.9 | | | 2.1 | | | 1.0 | | Provision for income taxes | 2.4 | | | 2.3 | | | 2.2 | | | 2.1 | |
Net income | Net income | 6.7 | % | | 2.8 | % | | 6.2 | % | | 3.7 | % | Net income | 7.0 | % | | 6.7 | % | | 6.5 | % | | 6.2 | % |
Summary unaudited results of operations for the periods presented are provided below.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Six Months Ended | | |
| June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 |
| (dollars in millions) | | | | | | |
Net sales | | | | | | | |
Metal containers | $ | 597.2 | | | $ | 575.6 | | | $ | 1,105.7 | | | $ | 1,082.7 | |
Closures | 410.5 | | | 363.4 | | | 767.6 | | | 719.5 | |
Plastic containers | 168.8 | | | 154.2 | | | 333.5 | | | 318.1 | |
Consolidated | $ | 1,176.5 | | | $ | 1,093.2 | | | $ | 2,206.8 | | | $ | 2,120.3 | |
| | | | | | | |
Segment income | | | | | | | |
Metal containers (1) | $ | 71.8 | | | $ | 14.0 | | | $ | 119.3 | | | $ | 52.9 | |
Closures (2) | 58.6 | | | 46.9 | | | 103.8 | | | 87.1 | |
Plastic containers (3) | 23.0 | | | 13.4 | | | 45.0 | | | 25.5 | |
Corporate (4) | (22.2) | | | (5.7) | | | (34.7) | | | (10.2) | |
Consolidated | $ | 131.2 | | | $ | 68.6 | | | $ | 233.4 | | | $ | 155.3 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 |
| (dollars in millions) |
Net sales | | | | | | | |
Dispensing and Specialty Closures | $ | 545.8 | | | $ | 410.5 | | | $ | 1,055.1 | | | $ | 767.6 | |
Metal Containers | 624.5 | | | 597.2 | | | 1,178.6 | | | 1,105.7 | |
Custom Containers | 178.4 | | | 168.8 | | | 353.1 | | | 333.5 | |
Consolidated | $ | 1,348.7 | | | $ | 1,176.5 | | | $ | 2,586.8 | | | $ | 2,206.8 | |
| | | | | | | |
Segment income | | | | | | | |
Dispensing and Specialty Closures (1) | $ | 73.8 | | | $ | 58.6 | | | $ | 139.5 | | | $ | 103.8 | |
Metal Containers (2) | 58.6 | | | 71.8 | | | 104.2 | | | 119.3 | |
Custom Containers (3) | 27.2 | | | 23.0 | | | 51.7 | | | 45.0 | |
Corporate (4) | (6.6) | | | (22.2) | | | (15.9) | | | (34.7) | |
Consolidated | $ | 153.0 | | | $ | 131.2 | | | $ | 279.5 | | | $ | 233.4 | |
(1) Includes rationalization charges of $1.2$0.1 million and $39.0$0.7 million for the three months ended June 30, 20202021 and 2019,2020, respectively, and $3.1$5.3 million and $39.3$1.4 million for the six months ended June 30, 20202021 and 2019, respectively.
(2) Includes rationalization charges of $0.7 million and $0.2 million for the three months ended June 30, 2020, and 2019, respectively, and $1.4 million and $5.9 million for the six months ended June 30, 2020 and 2019, respectively. Includes a charge of $3.5 million for the write-up of inventory for purchase accounting as a result of the acquisition of the Albéa Dispensing Business for each of the three and six months ended June 30, 2020 as a result of the acquisition of the dispensing operations of the Albéa Group in June 2020.
(2) Includes rationalization charges of $0.2 million and $1.2 million for the three months ended June 30, 2021 and 2020, respectively and $5.2 million and $3.1 million for the six months ended June 30, 2021 and 2020, respectively.
(3) Includes rationalization charges of $0.1 million for each of the three months ended June 30, 20202021 and 20192020 and $0.2 million for each of the six months ended June 30, 20202021 and 2019.2020.
(4) Includes costs attributed to announced acquisitions of $16.1 million and $18.3 million for the three and six months ended June 30, 2020, respectively.
Three Months Ended June 30, 20202021 Compared with Three Months Ended June 30, 20192020
Overview. Consolidated net sales were $1.18$1.35 billion in the second quarter of 2020,2021, a 7.614.6 percent increase as compared to the second quarter of 20192020 primarily due to the pass through of higher raw material costs, higher unit volumes across all businesses, includingin the Dispensing and Specialty Closures segment, the impact from acquisitions,favorable foreign currency translation and a more favorable mix of products sold in the closures business,Metal Container and Custom Container segments, partially offset by the pass through of lower raw material costs, a less favorable mix of products soldvolumes in the metalMetal Container and plastic container businesses and the impact of unfavorable foreign currency translation.Custom Container segments. Income before interest and income taxes for the second quarter of 20202021 was $131.2$153.0 million, a $62.6$21.8 million increase as compared to the same period in 2019,2020, primarily due to higher unit volumes and strong operating performance across all businesses, lower rationalization charges, higher pension incomein the Dispensing and Specialty Closures segment, a more favorable mix of products sold and strong operating performance in the closures business, partially offset by acquisition related costs of $16.1 million, a less favorable mix of products soldCustom Container segment, lower corporate expenses and rationalization charges, higher pension income and the inclusion in the metal container business, the negative impactprior year period of a charge for the purchase accounting write-up of acquired inventory of the dispensing operations of the Albéa Group, or the Albéa Dispensing Business, which was acquired in June 2020 and the unfavorable impact of a charge in the Custom Container segment in the prior year period for a non-commercial legal dispute relating to prior periods, partially offset by lower volumes in the plastic container business.Metal Container and Custom Container segments, higher production costs, less efficient manufacturing processes and lower production in the Metal Container segment, the unfavorable impact in the current year period from the delayed pass through of significantly higher resin costs in the Dispensing and Specialty Closures and Custom Container segments and foreign currency transaction losses. Results for the second quarters of 20202021 and 20192020 included rationalization charges of $2.0$0.4 million and $39.3 million, respectively. Results for the second quarters of 2020 and 2019 also included other pension and postretirement income of $9.7 million and $4.5$2.0 million, respectively. Results for the second quarter of 2020 also included costs attributed to announced acquisitions of $16.1 million. Net income for the second quarter of 20202021 was $78.2$94.5 million as compared to $31.0$78.2 million for the same period in 2019.2020. Net income per diluted share for the second quarter of 20202021 was $0.70$0.85 as compared to $0.28$0.70 for the same period in 2019.2020.
Net Sales. The $83.3$172.2 million increase in consolidated net sales in the second quarter of 20202021 as compared to the second quarter of 20192020 was the result of higher net sales across all the businesses.segments.
Net sales for the metal container businessDispensing and Specialty Closures segment increased $21.6$135.3 million, or 3.833.0 percent, in the second quarter of 20202021 as compared to the same period in 2019.2020. This increase was primarily the result of higher unit volumes of approximately fifteenten percent, partially offset by the pass through of lowerhigher raw material costs a less favorable mix of products sold and the impact of unfavorablefavorable foreign currency translation of approximately $2.0$17 million. The increase in unit volumes was primarily due to continued higher demand for products consumedprincipally the result of volumes from the Albéa Dispensing Business acquired in June 2020 and a strong recovery in the home,beverage, beauty and fragrance markets, partially offset by a decrease in volume for hygiene and home cleaning products as compared to the volume benefitinitial pantry filling in response to the emerging COVID-19 pandemic in the prior year from a certain customer that increased purchases following a destockingsecond quarter of inventory in previous periods.2020.
Net sales for the closures businessMetal Container segment increased $47.1$27.3 million, or 134.6 percent, in the second quarter of 20202021 as compared to the same period in 2019.2020. This increase was primarily the result of the pass through of higher unit volumesraw material and other manufacturing costs, the impact of favorable foreign currency translation of approximately three percent$7 million and a more favorable mix of products sold, partially offset by the impact of unfavorable foreign currency translationlower unit volumes of approximately $7.0 million and the pass through of lower raw material costs.two percent. The increasedecrease in unit volumes was principallyprimarily due to production shortfalls caused by raw material and labor supply challenges across the result of strong volumes for certain consumer health, hygiene, personal care and food products as well as the inclusion of the recent acquisitions of Cobra Plastics and the Albéa Dispensing Business. These volume gains were partially offset by weak demand for certain beauty and beverage products.supply chain.
Net sales for the plastic container businessCustom Container segment increased $14.6$9.6 million, or 9.55.7 percent, in the second quarter of 20202021 as compared to the same period in 2019.2020. This increase was principally due to the pass through of higher volumes of approximately fourteen percent, partially offset byraw material costs, a lessmore favorable mix of products sold the pass through of lower raw material costs and the impact of unfavorablefavorable foreign currency translation of approximately $1.0 million.$3 million, partially offset by lower volumes of approximately eleven percent. The increasedecline in volumes was due primarily to continued higherunprecedented demand in the prior year quarter for certain foodcleaning and consumer health and hygiene products.sanitizing products as a result of the initial pantry filling in response to the emerging COVID-19 pandemic in the second quarter of 2020.
Gross Profit. Gross profit margin increased 2.3decreased 1.7 percentage points to 19.117.4 percent in the second quarter of 20202021 as compared to the same period in 20192020 for the reasons discussed below in "Income before Interest and Income Taxes."
Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of consolidated net sales increaseddecreased to 8.57.0 percent in the second quarter of 20202021 as compared to 7.38.5 percent in the same period in 2019.2020. Selling, general and administrative expenses increased $20.5decreased $6.2 million to $100.6$94.4 million for the second quarter of 20202021 as compared to $80.1$100.6 million for the same period in 2019.2020. The increasedecrease in selling, general and administrative expenses was principally due to lower corporate expenses, primarily as a result of costs attributed to announced acquisitions of $16.1 million incurred in the prior year period, and the inclusion ofin the selling, general and administrative expenses from Cobra Plastics and the Albéa Dispensing Business which were acquired in 2020 andprior year period of a charge of $2.8 million in the Custom Container segment for a non-commercial legal dispute relating to prior periods.periods, partially offset by the inclusion of selling, general and administrative expenses from the Albéa Dispensing Business which was acquired in June 2020.
Income before Interest and Income Taxes. Income before interest and income taxes for the second quarter of 20202021 increased by $62.6$21.8 million as compared to the second quarter of 2019,2020, and margins increased to 11.211.3 percent from 6.311.2 percent over the same periods. The increase in income before interest and income taxes was primarily the result of higher income in eachthe Dispensing and Specialty Closures and Custom Container segments, lower corporate expenses primarily as a result of the
businessesprior year costs for announced acquisitions and lower rationalization charges, partially offset by higher selling, general and administrative expenses.lower income in the Metal Container segment. Rationalization charges were $2.0$0.4 million and $39.3$2.0 million in the second quarters of 2021 and 2020, and 2019, respectively. The second quarter of 2020 also included the negative impact of a $3.5 million charge related to the purchase accounting write-up of inventory for the Albéa Dispensing Business acquired in June 2020.
Segment income of the metal container businessDispensing and Specialty Closures segment for the second quarter of 20202021 increased $57.8$15.2 million as compared to the same period in 2019, and2020, while segment income margin increaseddecreased to 12.013.5 percent from 2.414.3 percent over the same periods. The increase in segment income wasperiods due primarily to lower rationalization charges,the pass through of significantly higher unit volumes and higher pension income, partially offset by a less favorable mix of products sold. Rationalization charges were $1.2 million and $39.0 million in the second quarters of 2020 and 2019, respectively.
Segment income of the closures business for the second quarter of 2020 increased $11.7 million as compared to the same period in 2019, and segment income margin increased to 14.3 percent from 12.9 percent over the same periods.raw material costs. The increase in segment income was primarily due to higher unit volumes, a more favorable mix of products soldstrong operating performance and higher pension income, partially offset by the negative impactinclusion in the prior year period of a $3.5 million charge for the purchase accounting write-up of inventory of the Albéa Dispensing Business.Business, partially offset by the unfavorable impact in the current year period from the delayed pass through of significantly higher resin costs and foreign currency transaction losses.
Segment income of the plastic container businessMetal Container segment for the second quarter of 2020 increased $9.62021 decreased $13.2 million as compared to the same period in 2019,2020, and segment income margin decreased to 9.4 percent from 12.0 percent over the same periods. The decrease in segment income was due primarily to higher production costs, less efficient manufacturing processes and lower production and volume levels, all due in large part to significant raw material supply issues and labor challenges, partially offset by higher pension income and lower rationalization charges. Rationalization charges were $0.2 million and $1.2 million in the second quarters of 2021 and 2020, respectively.
Segment income of the Custom Container segment for the second quarter of 2021 increased $4.2 million as compared to the same period in 2020, and segment income margin increased to 13.615.2 percent from 8.713.6 percent over the same periods. The increase in segment income was primarily attributable to higher volumes, lower manufacturing costs including for raw materialsa more favorable mix of products sold, strong operating performance and higher pension income, partially offset by the unfavorable impactinclusion in the prior year period of a $2.8 million charge for a non-commercial legal dispute relating to prior periods.periods, partially offset by lower volumes and the unfavorable impact in the current year period from the delayed pass through of higher resin costs.
Interest and Other Debt Expense. Interest and other debt expense for the second quarter of 2020 decreased $2.62021 increased $0.6 million to $25.8$26.4 million as compared to $28.4$25.8 million in the same period in 2019.2020. This decreaseincrease was primarily due to lowerhigher weighted average interest rates, partially offset by higher average outstanding borrowings primarily related toduring the quarter as a result of the acquisition of the Albéa Dispensing Business and additional revolving loan borrowings in the current year quarter principally to hold cash and cash equivalents to ensure liquidity against potential credit market disruptions as a result of the COVID-19 pandemic. We repaid such additional revolving loan borrowings in June 2020. Weighted2020, partially offset by lower weighted average interest rates were lower during the current quarter due to lower variable market rates and the redemption of all outstanding 5½% Senior Notes due 2022 in the third quarter of 2019.rates.
Provision for Income Taxes. The effective tax rates were 25.825.3 percent and 23.025.8 percent for the second quarters of 2021 and 2020, and 2019, respectively. The effective tax rate in the second quarter of 2020 was unfavorably impacted by certain nondeductible expenses principally related to costs incurred for the acquisition of the Albéa Dispensing Business. The effective tax rate in the second quarter of 2019 was favorably impacted by the resolution of a prior year tax audit.
Six Months Ended June 30, 20202021 Compared with Six Months Ended June, 20192020
Overview. Consolidated net sales were $2.21$2.59 billion in the first six months of 2020,2021, a 4.117.2 percent increase as compared to the first six months of 20192020 primarily as a result of higher unit volumes in eachthe Dispensing and Specialty Closures and Metal Container segments, the pass through of our businesses, includinghigher raw material costs, the impact from acquisitions,of favorable foreign currency translation and a more favorable mix of products sold in the closures business,Dispensing and Specialty Closures and Custom Container segments, partially offset by lower volumes in the pass throughCustom Container segment and a higher percentage of lower raw material costs across all businesses, a less favorable mix of productssmaller cans sold in the metal and plastic container businesses and the impact of unfavorable foreign currency translation.Metal Container segment. Income before interest and income taxes for the first six months of 20202021 increased by $78.1$46.1 million as compared to the same period in 20192020 primarily due to higher unit volumes in the Dispensing and strong operating performance in each of the businesses, lower rationalization charges, higher pension incomeSpecialty Closures and Metal Container segments, a more favorable mix of products sold and strong operating performance in the closures business. These increases were partially offset byDispensing and Specialty Closures and Custom Container segments, lower corporate expenses, higher selling, general and administrative expenses, a less favorable mix of products sold in the metal container business,pension income, the negative impact fromin the prior year period of a charge for the purchase accounting write-up of acquired inventory of the Albéa Dispensing Business and the unfavorable impactinclusion in the prior year period of a charge in the plastic container businessCustom Container segment for a non-commercial legal dispute relating to prior periods. These increases were partially offset by the unfavorable impact in the current year period from the delayed pass through of higher resin costs in the Dispensing and Specialty Closures and Custom Container segments, higher production costs, less efficient manufacturing processes and lower production levels in the Metal Container segment, lower volumes in the Custom Container segment, higher rationalization charges, a higher percentage of smaller cans sold in the Metal Container segment and foreign currency transaction losses. Results for the first six months of 20202021 and 20192020 included rationalization charges of $10.7 million and $4.7 million and $45.4a loss on early extinguishment of debt of $0.9 million and $1.5 million, respectively. Results for the first six months of 2020 also included costs attributed to acquisitions of $18.3 million and a loss on early extinguishment of debt of $1.5 million. Results for the first six months of 2020 and 2019 also included other pension and postretirement income of $19.4 million and $9.0 million, respectively. Net income for the first six months of 20202021 was $135.8$167.8 million as compared to $77.7$135.8 million for the same period in 2019.2020. Net income per diluted share for the first six months of 20202021 was $1.22$1.51 as compared to $0.70$1.22 for the same period in 2019.2020.
Net Sales. The $86.5$380.0 million increase in consolidated net sales in the first six months of 20202021 as compared to the first six months of 20192020 was the result of higher net sales across all businesses.the segments.
Net sales for the metal container businessDispensing and Specialty Closures segment increased $23.0$287.5 million, or 2.137.5 percent, in the first six months of 20202021 as compared to the same period in 2019.2020. This increase was primarily the result of higher unit volumes of approximately elevennine percent, partially offset by the pass through of lowerhigher raw material and other manufacturing costs, a less favorable mix of products sold and the impact of unfavorablefavorable foreign currency translation of approximately $4.0 million. The increase in unit volumes was primarily the result of continued higher demand for products consumed in the home and lower volumes in the first quarter of 2019 as a result of the 2018 pre-buy of products by customers in anticipation of significant metal inflation in 2019, partially offset by the volume benefit in the prior year from a certain customer that increased purchases following a destocking of inventory in previous periods.
Net sales for the closures business increased $48.1$27 million or 6.7 percent, in the first six months of 2020 as compared to the same period in 2019. This increase was primarily the result of higher unit volumes of approximately four 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 $12.0 million.sold. The increase in unit volumes was principally the result of strong volumes for certain consumer health, hygiene, personal care and food products, the inclusion of the recent acquisitions of Cobra Plastics andvolumes from the Albéa Dispensing Business which was acquired in June 2020 and lowerstrong volumes in the first quarter of 2019 as a result of the 2018 pre-buy of products by customers in anticipation of significant metal inflation in 2019. These volume gains were partially offset by weak demand for certainbeverage, beauty and beveragefragrance products.
Net sales for the plastic container businessMetal Container segment increased $15.4$72.9 million, or 4.86.6 percent, in the first six months of 20202021 as compared to the same period in 2019.2020. This increase was primarily the result of the pass through of higher raw material and other manufacturing costs, higher unit volumes of approximately four percent and the impact of favorable foreign currency translation of approximately $12 million, partially offset by a higher percentage of smaller cans sold. The increase in unit volumes was primarily due to the continued high consumer demand levels for food cans, partially offset by the negative impact on volume of production shortfalls caused by raw material and labor supply challenges across the supply chain.
Net sales for the Custom Container segment increased $19.6 million, or 5.9 percent, in the first six months of 2021 as compared to the same period in 2020. This increase was primarily due to higher volumes of approximately ten percent, partially offset by the pass through of lower raw material costs, a lessmore favorable mix of products sold, the pass through of higher raw material costs and the impact of unfavorablefavorable foreign currency translation of approximately $1.0 million.$5 million, partially offset by lower volumes of approximately six percent. The increasedecrease in volumes was due primarily to continued higherunprecedented demand in the prior year period for certain foodcleaning and consumer health and hygiene products.sanitizing products as a result of the initial pantry filling in response to the emerging COVID-19 pandemic.
Gross Profit. Gross profit margin increased 2.0decreased 0.9 percentage points to 18.517.6 percent in the first six months of 20202021 as compared to the same period in 20192020 for the reasons discussed below in "Income before Interest and Income Taxes".
Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of consolidated net sales increaseddecreased to 8.67.4 percent for the first six months of 20202021 as compared to 7.48.6 percent in the same period in 2019.2020. Selling, general and administrative expenses increased $32.7$1.3 million to $190.5$191.8 million for the first six months of 20202021 as compared to $157.8$190.5 million for the same period in 2019.2020. The increase in selling, general and administrative expenses was principally the result of costs attributed to announced acquisitions of $18.3 million, the inclusion of selling, general and administrative expenses from Cobra Plastics and the Albéa Dispensing Business which werewas acquired in June 2020, partially offset by the inclusion in the prior year period of costs attributed to announced acquisitions of $18.3 million, one-time plant employee incentive payments in the first quarter of 2020 and a charge of $2.8 million in the Custom Container segment for a non-commercial legal dispute relating to prior periods.
Income before Interest and Income Taxes. Income before interest and income taxes for the first six months of 20202021 increased by $78.1$46.1 million as compared to the first six months of 2019,2020, and margins increased to 10.610.8 percent from 7.310.6 percent over the same periods. The increase in income before interest and income taxes was primarily due to higher income in eachthe Dispensing and Specialty Closures and Custom Container segments and lower corporate expenses primarily as a result of the businesses,prior year costs for announced acquisitions, partially offset by lower income in the Metal Container segment and higher selling, general and administrative expenses.rationalization charges. Rationalization charges were $4.7$10.7 million and $45.4$4.7 million for the first six months of 20202021 and 2019,2020, respectively.
Segment income of the metal container businessDispensing and Specialty Closures segment for the first six months of 20202021 increased $66.4$35.7 million, as compared to the same period in 2019,2020, while segment income margin decreased to 13.2 percent from 13.5 percent over the same periods due primarily to the pass through of higher raw material costs. The increase in segment income was primarily due to higher unit volumes, strong operating performance, a more favorable mix of products sold and the inclusion in the prior year period of a $3.5 million charge for the purchase accounting write-up of inventory of the Albéa Dispensing Business, partially offset by the unfavorable impact in the current year period from the delayed pass through of higher resin costs, higher rationalization charges and foreign currency transaction losses. Rationalization charges were $5.3 million and $1.4 million in the first six months of 2021 and 2020, respectively.
Segment income of the Metal Container segment for the first six months of 2021 decreased $15.1 million as compared to the same period in 2020, and segment income margin decreased to 8.8 percent from 10.8 percent over the same periods. The decrease in segment income was primarily attributable to higher production costs, less efficient manufacturing processes and lower production levels, a higher percentage of smaller cans sold and higher rationalization charges, partially offset by higher unit volumes. Rationalization charges were $5.2 million and $3.1 million in the first six months of 2021 and 2020, respectively.
Segment income of the Custom Container segment for the first six months of 2021 increased $6.7 million as compared to the same period in 2020, and segment income margin increased to 10.814.6 percent from 4.913.5 percent over the same periods. The increase in segment income was primarily attributable to lower rationalization charges, higher unit volumes and higher pension income, partially offset by a less favorable mix of products sold. Rationalization charges were $3.1 million and $39.3 million in the first six months of 2020 and 2019, respectively.
Segment income of the closures business for the first six months of 2020 increased $16.7 million, as compared to the same period in 2019, and segment income margin increased to 13.5 percent from 12.1 percent over the same periods. The increase in segment income was primarily due to higher unit volumes, a more favorable mix of products sold, higher pension incomestrong operating performance and lower rationalization charges, partially offset by the negative impact frominclusion in the purchase accounting write-up of inventory of the Albéa Dispensing Business.
Segment income of the plastic container business for the first six months of 2020 increased $19.5 million as compared to the sameprior year period in 2019, and segment income margin increased to 13.5 percent from 8.0 percent over the same periods. The increase in segment income was primarily attributable to higher volumes, lower manufacturing costs including for raw materials and higher pension income, partially offset by the unfavorable impact of a $2.8 million charge for a non-commercial legal dispute relating to prior periods.
periods, partially offset by lower volumes and the delayed pass through of higher resin costs.
Interest and Other Debt Expense. Interest and other debt expense before loss on early extinguishment of debt for the first six months of 2020 decreased $6.22021 increased $3.5 million to $49.3$52.8 million as compared to $55.5$49.3 million in the same period in 2019 primarily2020 principally due to lowerhigher weighted average interest rates, partially offset by higher average outstanding borrowings primarily related to the acquisition of the Albéa Dispensing Business and additional revolving loan borrowings in the current year period principally to hold cash and cash equivalents to ensure liquidity against potential credit market disruptions as a result of the COVID-19 pandemic. We repaid such additional revolving loan borrowings in June 2020. Weighted2020, partially offset by lower weighted average interest rates were lower during the first six months of 2020 due to lower variable market ratesrates. In February 2021, we issued the 1.4% Notes and utilized the redemptionproceeds therefrom to prepay outstanding term loans under the Credit Agreement. In conjunction with this prepayment, we recognized a loss on early extinguishment of all outstanding 5½% Senior Notes due 2022debt of $0.9 million in the thirdfirst quarter of 2019.2021. In the first quartersix months of 2020, we recognized a loss on early extinguishment of debt of $1.5 million in conjunction with the prepayment of U.S. term loans under the Credit Agreement.
Provision for Income Taxes. The effective tax rates were 25.625.7 percent and 22.225.6 percent for the first six months of 2021 and 2020, and 2019, respectively. The effective tax rate for the first six months of 2020 was unfavorably impacted by certain nondeductible expenses principally related to costs incurred for the acquisition of the Albéa Dispensing Business. The effective tax rate for the first six months of 2019 was favorably impacted by the timing of certain tax deductions and the resolution of a prior year tax audit.
CAPITAL RESOURCES AND LIQUIDITY
Our principal sources of liquidity have been net cash from operating activities and borrowings under our debt instruments, including our senior secured credit facility. 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.
On February 26, 2020,10, 2021, we issued (i) an additional $200$500.0 million aggregate principal amount of the 4⅛%1.4% Notes at 99.5 percent of their principal amount, plus accrued and unpaid interest from November 12, 2019, and €500 million aggregate principal amount of the 2¼% Notes at 10099.945 percent of their principal amount. The proceeds from the sale of the 1.4% Notes were $499.7 million. We used the net proceeds from these issuances and revolving loan borrowings under the Credit Agreementsale of the 1.4% Notes to prepay all$500.0 million of our outstanding U.S. term loans under the Credit Agreement. We paid the initial purchasers' discount and offering expenses related to the sale of the 1.4% Notes with cash on hand. As a result of this prepayment, we recorded a pre-tax charge for the loss on early extinguishment of debt of $1.5$0.9 million during the first quarter of 20202021 for the write-off of unamortized debt issuance costs.
On April 17, 2020, we and certain of our subsidiaries entered into the Incremental Term Loan Commitment Agreement pursuant to the Credit Agreement, which provided for the lenders thereunder to lend to us, on a delayed draw basis, $900 million of Incremental U.S. Term Loans to fund the purchase price for the acquisition of the Albéa Dispensing Business. On June 1, 2020, we borrowed the Incremental U.S. Term Loans to fund the purchase price for the acquisition of the Albéa Dispensing Business.
On June 1, 2020, we acquired the Albéa Dispensing Business. This business operates a global network of ten manufacturing facilities across North America, Europe, South America and Asia. We funded the purchase price for this acquisition with the Incremental U.S. Term Loans and revolving loan borrowings under the Credit Agreement.
You should also read Notes 3 and 8Note 6 to our Condensed Consolidated Financial Statements for the three and six months ended June 30, 20202021 included elsewhere in this Quarterly Report.
For the six months ended June 30, 2021, we used proceeds from the issuance of the 1.4% Notes of $499.7 million, net borrowings of revolving loans of $212.2 million and cash and cash equivalents of $244.7 million to fund repayments of long-term debt of $500.0 million, cash used in operations of $209.3 million, net capital expenditures and other investing activities of $116.4 million, decreases in outstanding checks of $84.2 million, dividends paid on our common stock of $31.6 million, repurchases of our common stock of $8.5 million under our stock-based compensation plan, debt issuance costs of $4.9 million and the negative effect of exchange rate changes on cash and cash equivalents of $1.7 million.
For the six months ended June 30, 2020, we used net proceeds of $1,639.7 million from the issuance of the 2¼% Notes and the additional 4⅛% Notes and from the Incremental U.S. Term Loans of $1,639.7 million,incremental term loans borrowed under our Credit Agreement, net borrowings of revolving loans of $356.4 million and cash and cash equivalents of $10.0 million (excluding the negative effect of exchange rate changes of $2.7 million) to fund the purchases of the Albéa Dispensing Business and Cobra Plastics for $941.1 million, repayments of long-term debt of $766.2 million, net capital expenditures and other investing activities of $105.5 million, decreases in outstanding checks of $79.0 million, cash used in operations of $63.8 million, dividends paid on our common stock of $27.1 million, repurchases of our common stock of $13.1 million, and debt issuance costs of $10.3 million.
For the six months ended June 30, 2019, we used net borrowings of revolving loans of $416.0 million to fund cash used in operations of $129.1 million, decreases in outstanding checks of $83.7 million, net capital expenditures and other investing activities of $115.6 million, dividends paid on our common stock of $26.4 million, repayments of long-term debt of $8.2 million and repurchases of our common stock of $15.2 million and to increase cash and cash equivalents (including the positivenegative effect of exchange rate changes on cash and cash equivalents of $0.7 million) by $38.5$2.7 million.
At June 30, 2020,2021, we had $354.0$195.9 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, 20202021 was $819.3$976.0 million and Cdn $15.0 million.
Because we sell metal containers and closures used in fruit and vegetable pack processing, we have seasonal sales. As is common in the industry, we must utilize working capital to build inventory and then carry accounts receivable for some customers beyond the end of the packing season. Due to our seasonal requirements, which generally peak sometime in the summer or early fall, we may incur short-term indebtedness to finance our working capital requirements. Our peak seasonal working capital requirements have historically averaged approximately $350 million. We fund seasonal working capital requirements through revolving loans under the Credit Agreement, other foreign bank loans and cash on hand. We may use the available portion of revolving loans under the Credit Agreement, after taking into account our seasonal needs and outstanding letters of credit, for other general corporate purposes including acquisitions, capital expenditures, dividends, stock repurchases and to refinance or repurchase other debt.
We believe that cash generated from operations and funds from borrowings available under the Credit Agreement and other foreign bank loans will be sufficient to meet our expected operating needs, planned capital expenditures, debt service, tax obligations, pension benefit plan contributions, share repurchases and common stock dividends for the foreseeable future. We continue to evaluate acquisition opportunities in the consumer goods packaging market and may incur additional indebtedness, including indebtedness under the Credit Agreement, to finance any such acquisition.
We are in compliance with all financial and operating covenants contained in our financing agreements and believe that we will continue to be in compliance during 20202021 with all of these covenants.
Guaranteed Securities
Each of the 4¾% Notes, the 3¼% Notes, the 4⅛% Notes, the 2¼% Notes and the 1.4% Notes were issued by Silgan and are guaranteed by certain wholly owned subsidiaries of Silgan, collectively the Obligor Group.
The following summarized financial information relates to the Obligor Group as of June 30, 2021 and December 31, 2020 and for the six months ended June 30, 2021. 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 $1.47 billion and $1.46 billion as of June 30, 2021 and December 31, 2020, respectively, are not included in noncurrent assets in the table below.
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| | | June 30, 2021 | | Dec. 31, 2020 | | | | |
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Current assets | | | $1,270.2 | | $1,104.1 | | | | |
Noncurrent assets | | | 3,312.4 | | 3,324.0 | | | | |
Current liabilities | | | 952.0 | | 891.1 | | | | |
Noncurrent liabilities | | | 3,709.1 | | 3,744.6 | | | | |
At June 30, 2021 and December 31, 2020, the Obligor Group held current receivables due from other subsidiary companies of $38.0 million and $54.8 million, respectively; long-term notes receivable due from other subsidiary companies of $795.1 million and $818.9 million, respectively; and current payables due to other subsidiary companies of $6.1 million and $13.4 million, respectively.
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| | | | Six months ended June 30, 2021 |
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Net sales | | | | $1,859.4 |
Gross profit | | | | 285.4 | |
Net income | | | | 127.6 | |
For the six months ended June 30, 2021, net income in the table above excludes income from equity method investments of other subsidiary companies of $40.2 million. For the six months ended June 30, 2021, the Obligor Group recorded the following transactions with other subsidiary companies: sales to such other subsidiary companies of $21.3 million; net credits from such other subsidiary companies of $15.7 million; and net interest income from such other subsidiary companies of $9.4 million. For the six months ended June 30, 2021, the Obligor Group received dividends from other subsidiary companies of $16.1 million.
Rationalization Charges
We continually evaluate cost reduction opportunities across each of our businesses,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. Under our rationalization plans, we made cash payments of $3.6$3.5 million and $1.9$3.6 million for the six months ended June 30, 20202021 and 2019,2020, respectively. Exclusive of the footprint optimization plan for our metal container businessMetal Container segment and our resulting withdrawal from the Central States Pension Plan announced in 2019, remaining expenses and cash expenditures for our rationalization plans are expected to be $1.9$2.2 million and $3.4$7.0 million, respectively. Remaining expenses for the accretion of interest for the withdrawal liability related to the Central States Pension Plan are expected to average approximately $1.1 million per year and be recognized annually for the next twenty years,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 for the next twenty years, beginning in 2020.through 2040.
You should also read Note 43 to our Condensed Consolidated Financial Statements for the three and six months ended June 30, 20202021 included elsewhere in this Quarterly Report.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to our operations result primarily from changes in interest rates and, with respect to our international metal container and closures operations and our Canadian plastic container operations, from foreign currency exchange rates. In the normal course of business, we also have risk related to commodity price changes for items such as natural gas. We employ established policies and procedures to manage our exposure to these risks. Interest rate, foreign currency and commodity pricing transactions are used only to the extent considered necessary to meet our objectives. We do not utilize derivative financial instruments for trading or other speculative purposes.
Information regarding our interest rate risk, foreign currency exchange rate risk and commodity pricing risk has been disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.2020. Since such filing, other than the changes discussed in Notes 3, 86 and 97 to our Condensed Consolidated Financial Statements for the three and six months ended June 30, 20202021 included elsewhere in this Quarterly Report, there has not been a material change to our interest rate risk, foreign currency exchange rate risk or commodity pricing risk or to our policies and procedures to manage our exposure to these risks.
Item 4. CONTROLS AND PROCEDURES
As required by Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, as of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including the Principal Executive Officer and the Principal Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal controls over financial reporting during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, these internal controls.
On June 1, 2020, we acquired the Albéa Dispensing Business. You should read Note 3 to our Condensed Consolidated Financial Statements for the three and six months ended June 30, 2020 included elsewhere in this Quarterly Report for further information on our acquisition of the Albéa Dispensing Business. We are currently in the process of integrating the internal controls and procedures of the Albéa Dispensing Business into our internal controls over financial reporting. As provided under the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations of the Securities and Exchange Commission, we will include the internal controls and procedures of the Albéa Dispensing Business in our annual assessment of the effectiveness of our internal control over financial reporting for our 2021 fiscal year.
Part II. Other Information
Item 6. Exhibits
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Exhibit Number | | Description |
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*3.1 | | |
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*+10.1 | | |
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22 | | |
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*31.1 | | |
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*31.2 | | |
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*32.1 | | |
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*32.2 | | |
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101.INS | | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH | | Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
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*Filed herewith.
+ Management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.
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| SILGAN HOLDINGS INC. | |
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Dated: August 7, 20204, 2021 | /s/ Robert B. Lewis | |
| Robert B. Lewis | |
| Executive Vice President and | |
| Chief Financial Officer | |
| (Principal Financial and | |
| Accounting Officer) | |