UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended June 30, ~~2018~~2019



~~[ ]~~	☐	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.~~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 ~~[ X ]~~☒ No ~~[ ]~~☐

Indicate by check mark whether the Registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ 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 ~~[ X ]~~☒ 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.

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 ~~[ X ]~~☒

As of July 31, ~~2018,~~2019, the number of shares outstanding of the Registrant’s common stock ~~$0.01 par value,~~ was ~~110,617,896.~~111,175,846.



SILGAN HOLDINGS INC.

TABLE OF CONTENTS

	Page No.


Part I. Financial Information	3

Item 1. Financial Statements	3

Condensed Consolidated Balance Sheets at June 30, ~~2018~~2019 and ~~2017~~2018 and December 31, ~~2017~~2018	3

Condensed Consolidated Statements of Income for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018	4

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018	5

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, ~~2018~~2019 and ~~2017~~2018	6

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018	7

Notes to Condensed Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1920

Item 3. Quantitative and Qualitative Disclosures About Market Risk	2526

Item 4. Controls and Procedures	2526

Part II. Other Information	27

Item 6. Exhibits	27

Signatures	28

Part I. Financial Information

Item 1. Financial Statements

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)


	June 30, 2018			June 30, 2017			Dec. 31, 2017			June 30, 2019			June 30, 2018			Dec. 31, 2018
	(unaudited)			(unaudited)						(unaudited)			(unaudited)
Assets

Current assets:
Cash and cash equivalents	$	181,220		$	142,083		$	53,533		$	111,341		$	181,220		$	72,819
Trade accounts receivable, net	648,525			528,362			454,637			666,681			648,525			511,332
Inventories	833,719			830,887			721,290			822,584			833,719			634,806
Prepaid expenses and other current assets	63,361			68,026			62,462			59,245			63,361			71,177
Total current assets	1,726,825			1,569,358			1,291,922			1,659,851			1,726,825			1,290,134

Property, plant and equipment, net	1,480,390			1,452,569			1,489,872			1,523,850			1,480,390			1,517,510
Goodwill	1,158,910			1,160,624			1,171,454			1,146,363			1,158,910			1,148,302
Other intangible assets, net	399,590			424,437			417,088			369,210			399,590			383,448
Other assets, net	293,962			287,584			275,113			411,944			293,962			239,900
	$	5,059,677		$	4,894,572		$	4,645,449		$	5,111,218		$	5,059,677		$	4,579,294

Liabilities and Stockholders’ Equity

Current liabilities:
Revolving loans and current portion of long-term debt	$	788,731		$	648,850		$	108,789		$	886,458		$	788,731		$	170,214
Trade accounts payable	609,164			455,457			659,629			598,484			609,164			712,739
Accrued payroll and related costs	65,493			64,573			66,257			68,585			65,493			68,773
Accrued liabilities	90,360			110,325			123,602			143,360			90,360			127,342
Total current liabilities	1,553,748			1,279,205			958,277			1,696,887			1,553,748			1,079,068

Long-term debt	2,173,941			2,444,912			2,438,502			1,824,533			2,173,941			2,134,400
Deferred income taxes	274,086			416,118			262,394			270,430			274,086			268,036
Other liabilities	219,892			211,330			220,211			389,466			219,892			216,525

Stockholders’ equity:
Common stock	1,751			1,751			1,751			1,751			1,751			1,751
Paid-in capital	268,559			255,077			262,201			280,636			268,559			276,062
Retained earnings	1,897,417			1,589,498			1,809,845			2,049,995			1,897,417			1,997,785
Accumulated other comprehensive loss	(208,963		)	(185,139		)	(188,973		)	(265,373		)	(208,963		)	(268,808		)
Treasury stock	(1,120,754		)	(1,118,180		)	(1,118,759		)	(1,137,107		)	(1,120,754		)	(1,125,525		)
Total stockholders’ equity	838,010			543,007			766,065			929,902			838,010			881,265
	$	5,059,677		$	4,894,572		$	4,645,449		$	5,111,218		$	5,059,677		$	4,579,294

See accompanying notes.

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018

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

(Unaudited)

Three Months Ended Six Months Ended
June 30,
2018 June 30,
2017 June 30,
2018 June 30,
2017

Net sales $ 1,059,103
$ 1,021,814
$ 2,071,385
$ 1,827,220
Cost of goods sold 885,853
863,120
1,738,101
1,550,547
Gross profit 173,250
158,694
333,284
276,673
Selling, general and administrative expenses 78,253
88,654
154,998
157,313
Rationalization charges 492
3,038
1,195
3,923
Other pension and postretirement income (9,612 ) (8,231 ) (19,210 ) (16,557 )
Income before interest and income taxes 104,117
75,233
196,301
131,994
Interest and other debt expense before loss on
early extinguishment of debt
29,922
29,207
60,401
49,625
Loss on early extinguishment of debt 2,493
4,375
2,493
7,052
Interest and other debt expense 32,415
33,582
62,894
56,677
Income before income taxes 71,702
41,651
133,407
75,317
Provision for income taxes 16,359
13,725
32,340
24,160
Net income $ 55,343
$ 27,926
$ 101,067
$ 51,157

Earnings per share:

Basic net income per share $ 0.50
$ 0.25
$ 0.91
$ 0.46
Diluted net income per share $ 0.50
$ 0.25
$ 0.91
$ 0.46

Dividends per share $ 0.10
$ 0.09
$ 0.20
$ 0.18

Weighted average number of shares:

Basic 110,645
110,358
110,566
110,291
Effect of dilutive securities 929
968
998
976
Diluted 111,574
111,326
111,564
111,267



	Three Months Ended						Six Months Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018

Net sales	$	1,093,163		$	1,059,103		$	2,120,294		$	2,071,385
Cost of goods sold	909,650			885,853			1,770,784			1,738,101
Gross profit	183,513			173,250			349,510			333,284
Selling, general and administrative expenses	80,087			78,253			157,749			154,998
Rationalization charges	39,317			492			45,400			1,195
Other pension and postretirement income	(4,490		)	(9,612		)	(8,980		)	(19,210		)
Income before interest and income taxes	68,599			104,117			155,341			196,301
Interest and other debt expense before loss on early extinguishment of debt	28,401			29,922			55,505			60,401
Loss on early extinguishment of debt	—			2,493			—			2,493
Interest and other debt expense	28,401			32,415			55,505			62,894
Income before income taxes	40,198			71,702			99,836			133,407
Provision for income taxes	9,243			16,359			22,140			32,340
Net income	$	30,955		$	55,343		$	77,696		$	101,067

Earnings per share:
Basic net income per share	$	0.28		$	0.50		$	0.70		$	0.91
Diluted net income per share	$	0.28		$	0.50		$	0.70		$	0.91

Weighted average number of shares:
Basic	111,185			110,645			110,945			110,566
Effect of dilutive securities	317			929			600			998
Diluted	111,502			111,574			111,545			111,564

See accompanying notes.

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018

(Dollars in thousands)

(Unaudited)



	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017			June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018

Net income	$	55,343		$	27,926		$	101,067		$	51,157		$	30,955		$	55,343		$	77,696		$	101,067
Other comprehensive income, net of tax:
Other comprehensive income (loss), net of tax:
Changes in net prior service credit and actuarial losses	778			629			1,634			1,258			2,614			778			5,120			1,634
Change in fair value of derivatives	587			(135		)	197			(475		)	(1,601		)	587			(2,488		)	197
Foreign currency translation	(35,621		)	30,477			(21,821		)	37,934			6,045			(35,621		)	803			(21,821		)
Other comprehensive (loss) income	(34,256		)	30,971			(19,990		)	38,717
Other comprehensive income (loss)													7,058			(34,256		)	3,435			(19,990		)
Comprehensive income	$	21,087		$	58,897		$	81,077		$	89,874		$	38,013		$	21,087		$	81,131		$	81,077

See accompanying notes.

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30, ~~2018~~2019 and ~~2017~~2018

(Dollars in thousands)

(Unaudited)


	2018			2017			2019			2018
Cash flows provided by (used in) operating activities:
Net income	$	101,067		$	51,157		$	77,696		$	101,067
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	97,903			83,327			104,102			97,903
Rationalization charges	1,195			3,923			45,400			1,195
Stock compensation expense	7,420			7,202			8,244			7,420
Loss on early extinguishment of debt	2,493			7,052			—			2,493
Other changes that provided (used) cash, net of effects from acquisition:
Other changes that provided (used) cash:
Trade accounts receivable, net	(134,961		)	(118,516		)	(155,198		)	(134,961		)
Inventories	(176,222		)	(134,374		)	(187,790		)	(176,222		)
Trade accounts payable	45,232			(27,554		)	(19,421		)	45,232
Accrued liabilities	(29,125		)	(2,101		)	(22,875		)	(29,125		)
Other, net	(7,886		)	(8,923		)	20,764			(7,886		)
Net cash used in operating activities	(92,884		)	(138,807		)	(129,078		)	(92,884		)

Cash flows provided by (used in) investing activities:
Purchase of business, net of cash acquired	—			(1,022,092		)
Capital expenditures	(91,278		)	(81,287		)	(116,165		)	(91,278		)
Other, net	486			477			560			486
Net cash used in investing activities	(90,792		)	(1,102,902		)	(115,605		)	(90,792		)

Cash flows provided by (used in) financing activities:
Borrowings under revolving loans	848,686			992,436			703,359			848,686
Repayments under revolving loans	(132,386		)	(559,050		)	(287,368		)	(132,386		)
Proceeds from issuance of long-term debt	—			1,789,200
Repayments of long-term debt	(284,638		)	(744,416		)	(8,161		)	(284,638		)
Changes in outstanding checks - principally vendors	(87,795		)	(78,941		)	(83,670		)	(87,795		)
Dividends paid on common stock	(22,417		)	(20,253		)	(26,415		)	(22,417		)
Debt issuance costs	(2,866		)	(16,643		)	—			(2,866		)
Repurchase of common stock under stock plan	(3,057		)	(3,231		)	(15,252		)	(3,057		)
Net cash provided by financing activities	315,527			1,359,102			282,493			315,527

Effect of exchange rate changes on cash and cash equivalents	(4,164		)	—			712			(4,164		)

Cash and cash equivalents:
Net increase	127,687			117,393			38,522			127,687
Balance at beginning of year	53,533			24,690			72,819			53,533
Balance at end of period	$	181,220		$	142,083		$	111,341		$	181,220

Interest paid, net	$	62,192		$	35,686		$	53,069		$	62,192
Income taxes paid, net	31,303			33,260			23,634			31,303

See accompanying notes.

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF

STOCKHOLDERS' EQUITY

For the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018

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

(Unaudited)


										Accumulated Other Comprehensive Loss											Three Months Ended								Six Months Ended
	Common Stock																Total Stockholders’ Equity			June 30, 2019				June 30, 2018				June 30, 2019				June 30, 2018
	Shares Outstanding	Par Value		Paid-in Capital			Retained Earnings						Treasury Stock
Balance at December 31, 2016	55,051	$	876	$	249,763		$	1,558,594			$	(223,856	)		$	(1,115,962	)		$	469,415
Net income	—	—		—			51,157				—				—				51,157
Other comprehensive income	—	—		—			—			38,717				—				38,717
Dividends declared on common stock	—	—		—			(20,253		)	—				—				(20,253		)
Common stock - shares outstanding
Balance at beginning of period																					111,128				110,569				110,430				110,385
Net issuance of treasury stock for vested restricted stock units																					48				49				746				233
Balance at end of period																					111,176				110,618				111,176				110,618

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

Paid-in capital
Balance at beginning of period																					276,435				265,022				276,062				262,201
Stock compensation expense	—	—		7,202			—			—				—				7,202			4,335				3,720				8,244				7,420
Net issuance of treasury stock for vested restricted stock units	123	—		(1,013		)	—			—				(2,218		)		(3,231		)	(134		)		(183		)		(3,670		)		(1,062		)
Two-for-one stock split	55,142	875		(875		)	—			—				—				—
Balance at June 30, 2017	110,316	$	1,751	$	255,077		$	1,589,498		$	(185,139	)		$	(1,118,180	)		$	543,007
Balance at December 31, 2017	110,385	$	1,751	$	262,201		$	1,809,845		$	(188,973	)		$	(1,118,759	)		$	766,065
Adoption of accounting standards update for revenue recognition	—	—		—			9,061			—				—				9,061
Balance at end of period																					280,636				268,559				280,636				268,559

Retained earnings
Balance at beginning of period																					2,031,487				1,853,351				1,997,785				1,809,845
Net income	—	—		—			101,067			—				—				101,067			30,955				55,343				77,696				101,067
Other comprehensive loss	—	—		—			—			(19,990		)		—				(19,990		)
Dividends declared on common stock	—	—		—			(22,556		)	—				—				(22,556		)	(12,447		)		(11,277		)		(24,893		)		(22,556		)
Stock compensation expense	—	—		7,420			—			—				—				7,420
Adoption of accounting standards updates related to leases in 2019 and revenue recognition in 2018																					—				—				(593		)		9,061
Balance at end of period																					2,049,995				1,897,417				2,049,995				1,897,417

Accumulated other comprehensive loss
Balance at beginning of period																					(272,431		)		(174,707		)		(268,808		)		(188,973		)
Other comprehensive income (loss)																					7,058				(34,256		)		3,435				(19,990		)
Balance at end of period																					(265,373		)		(208,963		)		(265,373		)		(208,963		)

Treasury stock
Balance at beginning of period																					(1,137,035		)		(1,120,626		)		(1,125,525		)		(1,118,759		)
Net issuance of treasury stock for vested restricted stock units	233	—		(1,062		)	—			—				(1,995		)		(3,057		)	(72		)		(128		)		(11,582		)		(1,995		)
Balance at June 30, 2018	110,618	$	1,751	$	268,559		$	1,897,417		$	(208,963	)		$	(1,120,754	)		$	838,010
Balance at end of period																					(1,137,107		)		(1,120,754		)		(1,137,107		)		(1,120,754		)
Total stockholders' equity																					$	929,902			$	838,010			$	929,902			$	838,010

Dividends declared on common stock per share																					$	0.11			$	0.10			$	0.22			$	0.20

See accompanying notes.

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, ~~2018~~2019 and ~~2017~~2018 and for the

three and six months then ended is unaudited)

Note 1. Significant Accounting Policies

Basis of Presentation.The accompanying unaudited condensed consolidated financial statements of Silgan Holdings Inc., or Silgan, have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. The results of operations for any interim period are not necessarily indicative of the results of operations for the full year.

The Condensed Consolidated Balance Sheet at December 31, ~~2017~~2018 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, ~~2017.~~2018.

Recently Adopted Accounting Pronouncements. In ~~May 2014,~~February 2016, the Financial Accounting Standards Board, or FASB, issued an accounting standards update, or ASU, that amends the guidance for revenue recognition. This amendment contains principles that require an entity to recognize revenue to depict the transfer of promised goods and services to customers at an amount that an entity expects to be entitled to in exchange for those promised goods or services. We adopted this amendment on January 1, 2018, using the modified retrospective method for all contracts for which performance was not completed as of January 1, 2018. Results for the reporting period beginning January 1, 2018 are presented under the new guidance, while prior period amounts are not adjusted. The adoption of this amendment required us to accelerate the recognition of revenue prior to shipment to certain customers in cases where we produce promised goods with no alternative use to us and for which we have an enforceable right of payment for production completed. As a result of the adoption of this amendment, we increased trade accounts receivable, net by $69.4 million, decreased inventories by $56.6 million, increased accrued liabilities by $0.9 million and increased long-term deferred income tax liabilities by $2.8 million, resulting in a net increase to retained earnings of $9.1 million, all as of January 1, 2018. The adoption of this amendment did not have a material impact on our financial position, results of operations or cash flows. See Note 2 for further information.

In August 2016, the FASB issued an ASU that provides guidance for cash flow classification for certain cash receipts and cash payments to address diversity in practice in the manner in which items are classified on the statement of cash flows as either operating, investing or financing activities. We have adopted this amendment as of January 1, 2018 using the retrospective approach. The adoption of this amendment did not have a material impact on our statement of cash flows.

In March 2017, the FASB issued an ASU that amends the presentation of net periodic pension cost and net periodic postretirement benefit cost. This amendment requires an entity to disaggregate the service cost component from the other components of net periodic benefit cost, to report the service cost component in the same line item as other compensation costs and to report the other components of net periodic benefit cost (which include interest cost, expected return on plan assets, amortization of prior service cost or credit and actuarial gains and losses) separately. In addition, capitalization of net periodic benefit cost in assets is limited to the service cost component. We have adopted this amendment as of January 1, 2018. As a result of separately reporting the other components of net periodic benefit cost, we retrospectively increased cost of goods sold by $6.5 million and $13.1 million, increased selling, general and administrative expenses by $1.7 million and $3.5 million and reported other pension and postretirement income of $8.2 million and $16.6 million in our Condensed Consolidated Statement of Income for the three and six months ended June 30, 2017, respectively, based on amounts previously included in net periodic benefit costs for retirement benefits as disclosed in Note 10. The adoption of this amendment did not have a material impact on our financial position, results of operations or cash flows.

~~Recently Issued Accounting Pronouncements.~~ ~~In February 2016, the FASB issued an ASU that amends~~ existing guidance for certain leases by lessees. This amendment ~~will require an entity~~required us to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. ~~In addition,~~We adopted this amendment ~~clarifies~~on January 1, 2019 using the ~~presentation requirements of~~transition method, which allowed us to recognize the effects of applying this amendment as a cumulative effect to retained earnings as of January 1, 2019. We elected certain practical expedients permitted under the transition guidance for this amendment, which did not require us to reassess whether other contracts contain leases inand allowed us to carryforward our lease classifications determined under the ~~statement~~previous guidance. In addition, we elected to retain our previously determined assumptions concerning options to extend or terminate our leases. As a result of ~~income~~the adoption of this amendment, we recognized additional long-term assets of $160.8 million, additional related lease liabilities of $161.4 million and ~~statement of cash flows. This amendment will be effective for us~~reduced retained earnings by $0.6 million all on January 1, 2019. ~~Early~~The adoption ~~is permitted. This~~of this amendment did not have a material impact on our results of operations or cash flows. See Note 2 for further information.

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, ~~2018~~2019 and ~~2017~~2018 and for the

three and six months then ended is unaudited)

Note 2. Leases

~~amendment requires the use of one of two retrospective transition methods.~~ We have noncancelable operating leases for office and plant facilities, equipment and automobiles that expire at various dates through 2040. Certain operating leases have renewal options and rent escalation clauses as well as various purchase options.

Lease right-of-use assets represent the right to use an underlying asset pursuant to the lease for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Lease right-of-use assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate generally applicable to the location of the lease right-of-use asset, unless an implicit rate is readily determinable. We combine lease and certain non-lease components in determining the lease payments subject to the initial present value calculation. Lease right-of-use assets include upfront lease payments and exclude lease incentives, where applicable. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised.

Lease expense for operating leases consists of both fixed and variable components. Expense related to fixed lease payments are recognized on a straight-line basis over the lease term. Variable lease payments are generally expensed as incurred, where applicable, and include certain index-based changes in rent, certain non-lease components, such as maintenance and other services provided by the lessor, and other charges included in the lease. Leases with an initial term of twelve months or less are not ~~selected~~recorded on the balance sheet. The depreciable life of lease right-of-use assets is generally the expected lease term, unless there is a ~~transition method~~transfer of title or purchase option reasonably certain of exercise for such assets.

We recognized total lease expense of $17.3 million and ~~are currently evaluating~~$33.8 million for the ~~impact of this amendment on our financial position, results of operations~~three and six months ended June 30, 2019, respectively, primarily related to operating lease costs paid to lessors from operating cash flows. We did not recognize any new significant leases in our Condensed Consolidated Balance Sheet for the period ended June 30, 2019.

The aggregate annual maturities of operating lease liabilities are as follows (dollars in thousands):



Six months ended December 31, 2019	$	22,297
2020	41,237
2021	34,365
2022	26,734
2023	22,297
Thereafter	75,794
Total lease payments	222,724
Less imputed interest	(42,287		)
Total	$	180,437

Operating lease right-of-use assets as of June 30, 2019 were recorded in our Condensed Consolidated Balance Sheets as other assets, net of $172.4 million. Operating lease liabilities of $180.4 million as of June 30, 2019 were recorded in our Condensed Consolidated Balance Sheets as accrued liabilities of $34.2 million and other liabilities of $146.2 million. At June 30, 2019, our operating leases had a weighted average discount rate of 5.7 percent and a weighted average remaining lease term of approximately seven years.

To a lesser extent, we have certain leases that qualify as finance leases. Finance lease right-of-use assets as of June 30, 2019 were recorded in our Condensed Consolidated Balance Sheets as property, plant and equipment, net of $22.6 million. Finance lease liabilities of $22.2 million as of June 30, 2019 were recorded in our Condensed Consolidated Balance Sheets as revolving loans and current portion of long term-debt of $1.2 million and long-term debt of $21.0 million.

At June 30, 2019, we did not have any significant operating or finance leases that had not commenced.

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, 2019 and 2018 and for the

three and six months then ended is unaudited)

Note 2.3. Revenue

Our revenues are primarily derived from the sale of rigid packaging products to customers. We recognize revenue at the amount we expect to be entitled to in exchange for promised goods for which we have transferred control to customers. If the consideration agreed to in a contract includes a variable amount, we estimate the amount of consideration we expect to be entitled to in exchange for transferring the promised goods to the customer. Generally, revenue is recognized at a point in time for standard promised goods at the time of shipment when title and risk of loss pass to the customer, and revenue is recognized over time in cases where we produce promised goods with no alternative use to us and for which we have an enforceable right of payment for production completed. The production cycle for customer contracts subject to over time recognition is generally completed in less than one month. Due to the short-term duration of our production cycle, we have elected the practical expedient permitting us to exclude disclosure regarding our performance obligations with respect to outstanding purchase orders. We have elected to treat shipping and handling costs after the control of goods have been transferred to the customer as a fulfillment cost. Sales and similar taxes that are imposed on our sales and collected from customers are excluded from revenues.

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				Three Months Ended				Six Months Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017		June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
	(Dollars in thousands)								(Dollars in thousands)
Metal containers	$	524,863	$	529,715	$	1,010,818	$	995,951	$	575,618	$	524,863	$	1,082,680	$	1,010,818
Closures	378,762		349,087		749,108		546,769		363,344		378,762		719,543		749,108
Plastics	155,478		143,012		311,459		284,500		154,201		155,478		318,071		311,459
	$	1,059,103	$	1,021,814	$	2,071,385	$	1,827,220	$	1,093,163	$	1,059,103	$	2,120,294	$	2,071,385

Revenues by geography were as follows:



	Three Months Ended				Six Months Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
	(Dollars in thousands)
North America	$	858,565	$	815,337	$	1,669,332	$	1,595,127
Europe and other	234,598		243,766		450,962		476,258
	$	1,093,163	$	1,059,103	$	2,120,294	$	2,071,385

Three Months Ended Six Months Ended
June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017
(Dollars in thousands)
North America $ 815,337
$ 802,210
$ 1,595,127
$ 1,477,048
Europe and other 243,766
219,604
476,258
350,172
$ 1,059,103
$ 1,021,814
$ 2,071,385
$ 1,827,220

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 $77.2 million, $76.7 million, and $72.5 million as of June 30, ~~2018.~~2019 and 2018 and December 31, 2018, respectively. Unbilled receivables are included in trade accounts receivable, net on our Condensed Consolidated Balance Sheet. Had we not adopted the amended guidance for revenue recognition on January 1, 2018, our trade accounts receivable, net would have been $571.8 million and our inventories would have been $897.1 million as of June 30, 2018.

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, ~~2018~~2019 and ~~2017~~2018 and for the

three and six months then ended is unaudited)

~~Note 3. Acquisition~~

On April 6, 2017, we acquired the specialty closures and dispensing systems operations of WestRock Company, now operating under the name Silgan Dispensing Systems, or SDS. During the three months ended March 31, 2018, we finalized our purchase price allocation. There were no material changes to the previously recorded fair values of assets acquired and liabilities assumed.

Note 4. Rationalization Charges



	Three Months Ended				Six Months Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
	(Dollars in thousands)
Metal containers	$	39,023	$	258	$	39,245	$	740
Closures	248		—		5,908		39
Plastic containers	46		234		247		416
	$	39,317	$	492	$	45,400	$	1,195

In June 2019, we announced a footprint optimization plan for our metal container business, which includes the closing of our metal container manufacturing facilities in Mt. Vernon, Missouri and ~~$3.0~~Waupun, Wisconsin anticipated to occur in the fourth quarter of 2019. These plant closings, in conjunction with the prior ratification of a new labor agreement at our Menomonee Falls, Wisconsin metal container manufacturing facility that provided for the withdrawal for that facility from the Central States, Southeast and Southwest Areas Pension Plan, or the Central States Pension Plan, will result in our complete withdrawal from the Central States Pension Plan. We estimate net rationalization charges for this plan of $3.7 million for the ~~three months ended June 30, 2018~~plant closings and ~~2017, respectively,~~$56.4 million for the withdrawal from the Central States Pension Plan. We recorded total rationalization charges for this plan of $38.7 million in the second quarter of 2019, consisting of $2.5 million for the plant closings and $36.2 million to recognize the present value of the estimated withdrawal liability related to the Central States Pension Plan. Remaining expenses and cash expenditures for the plant closings are $1.2 million and ~~$3.9~~$2.9 million, respectively, and are expected through 2021. Remaining expenses for the accretion of interest for the withdrawal liability related to the Central States Pension Plan are expected to average approximately $1.0 million per year and be recognized annually for the next twenty years, and remaining cash expenditures related to the withdrawal from the Central States Pension Plan are expected to be approximately $2.8 million annually for the next twenty years.

Rationalization charges in the first six months ~~ended June 30, 2018 and 2017, respectively. Under~~of 2019 for the closures business were primarily related to the announced shutdown in the first quarter of 2019 of the Torello, Spain metal closures manufacturing facility.

Activity in reserves for our rationalization plans ~~we made cash payments of $1.3 million and $2.1 million for the six months ended June 30, 2018 and 2017, respectively.~~were as follows:



	Employee Severance and Benefits			Plant Exit Costs			Non-Cash Asset Write-Down			Total
	(Dollars in thousands)
Balance at December 31, 2018	$	130		$	1,482		$	—		$	1,612
Charged to expense	41,661			437			3,302			45,400
Utilized and currency translation	(1,146		)	(723		)	(3,302		)	(5,171		)
Balance at June 30, 2019	$	40,645		$	1,196		$	—		$	41,841

Rationalization reserves as of June 30, ~~2018~~2019 were recorded in our Condensed Consolidated Balance Sheets as accrued liabilities of $5.5 million and other liabilities of ~~$0.8 million~~$36.3 million. Exclusive of the footprint optimization plan for our metal container business and ~~$1.1 million, respectively. Remaining~~withdrawal from the Central States Pension Plan discussed above, remaining expenses for our rationalization plans of ~~$1.4~~$4.2 million are expected primarily ~~within the next twelve months. Remaining~~through 2019 and remaining cash expenditures for our rationalization plans of ~~$3.3~~$4.7 million are expected through 2023.

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, 2019 and 2018 and for the

three and six months then ended is unaudited)

Note 5. 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, 2018	$	(154,466	)	$	(1,008	)	$	(113,334	)	$	(268,808	)
Other comprehensive loss before reclassifications	—			(2,557		)	803			(1,754		)
Amounts reclassified from accumulated other comprehensive loss	5,120			69			—			5,189
Other comprehensive income	5,120			(2,488		)	803			3,435
Balance at June 30, 2019	$	(149,346	)	$	(3,496	)	$	(112,531	)	$	(265,373	)

Unrecognized Net
Defined Benefit
Plan Costs

Change in Fair
Value of
Derivatives

Foreign
Currency
Translation
Total
(Dollars in thousands)
Balance at December 31, 2017 $ (104,822 ) $ (89 ) $ (84,062 ) $ (188,973 )
Other comprehensive loss before reclassifications —
191
(21,821 ) (21,630 )
Amounts reclassified from accumulated other
comprehensive loss
1,634
6
—
1,640
Other comprehensive loss 1,634
197
(21,821 ) (19,990 )
Balance at June 30, 2018 $ (103,188 ) $ 108
$ (105,883 ) $ (208,963 )

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, ~~2018~~2019 were net (losses) of ~~$(1.0)~~$(3.4) million and ~~$(2.1)~~$(6.8) million, respectively, excluding income tax benefits of ~~$0.3~~$0.8 million and ~~$0.5~~$1.7 million, respectively. For the three and six months ended June 30, ~~2018,~~2019, these net (losses) consisted of amortization of net actuarial (losses) of ~~$(1.6)~~$(4.0) million and ~~$(3.3)~~$(7.9) million and amortization of net prior service credit of $0.6 million and ~~$1.2~~$1.1 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 10 for further information.

The amounts reclassified to earnings from the change in fair value of derivatives component of accumulated other comprehensive loss for the three and six months ended June 30, ~~2018~~2019 were not significant.

Other comprehensive income before reclassifications related to foreign currency translation for the three and six months ended June 30, ~~2018~~2019 consisted of (i) foreign currency gains (losses) related to translation of quarter end financial statements of foreign

~~SILGAN HOLDINGS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Information at June 30, 2018 and 2017 and for the~~

~~three and six months then ended is unaudited)~~

subsidiaries utilizing a functional currency other than the U.S. dollar of ~~$(49.9)~~$9.7 million and ~~$(29.4)~~$(1.6) million, respectively, (ii) foreign currency (losses) gains related to intra-entity foreign currency transactions that are of a long-term investment nature of ~~$(0.4)~~$(0.1) million and ~~$0.2~~$0.6 million, respectively, and (iii) foreign currency (losses) gains related to our net investment hedges of ~~$19.2~~$(4.7) million and ~~$9.6~~$2.4 million, respectively, excluding income tax benefits (provisions) of ~~$(4.5)~~$1.1 million and ~~$(2.3)~~$(0.6) million, respectively. See Note 8 for further discussion.

~~Note 6. Inventories~~

~~Inventories consisted of the following:~~

June 30,
2018

June 30,
2017

Dec. 31,
2017
(Dollars in thousands)
Raw materials $ 252,792
$ 209,183
$ 233,410
Work-in-process 136,210
142,043
124,396
Finished goods 514,911
535,204
433,937
Other 12,629
12,876
12,370
916,542
899,306
804,113
Adjustment to value inventory
at cost on the LIFO method
(82,823 ) (68,419 ) (82,823 )
$ 833,719
$ 830,887
$ 721,290

~~Note 7. Long-Term Debt~~

~~Long-term debt consisted of the following:~~

June 30,
2018

June 30,
2017
Dec. 31, 2017
(Dollars in thousands)
Bank debt
Bank revolving loans $ 760,000
$ 609,593
$ —
U.S. term loans 800,000
800,000
800,000
Canadian term loans 22,937
35,021
27,147
Other foreign bank revolving and term loans 34,914
45,357
76,798
Total bank debt 1,617,851
1,489,971
903,945
5% Senior Notes —
280,000
280,000
5½% Senior Notes 300,000
300,000
300,000
4¾% Senior Notes 300,000
300,000
300,000
3¼% Senior Notes 759,460
742,105
780,325
Total debt - principal 2,977,311
3,112,076
2,564,270
Less unamortized debt issuance costs 14,639
18,314
16,979
Total debt 2,962,672
3,093,762
2,547,291
Less current portion 788,731
648,850
108,789
$ 2,173,941
$ 2,444,912
$ 2,438,502

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, ~~2018~~2019 and ~~2017~~2018 and for the

three and six months then ended is unaudited)

Note 6. Inventories

Inventories consisted of the following:



	June 30, 2019			June 30, 2018			Dec. 31, 2018
	(Dollars in thousands)
Raw materials	$	271,396		$	252,792		$	288,860
Work-in-process	141,268			136,210			123,574
Finished goods	523,145			514,911			335,180
Other	12,658			12,629			13,075
	948,467			916,542			760,689
Adjustment to value inventory at cost on the LIFO method	(125,883		)	(82,823		)	(125,883		)
	$	822,584		$	833,719		$	634,806

Note 7. Long-Term Debt

Long-term debt consisted of the following:



	June 30, 2019		June 30, 2018		Dec. 31, 2018
	(Dollars in thousands)
Bank debt
Bank revolving loans	$	506,000	$	760,000	$	—
U.S. term loans	800,000		800,000		800,000
Canadian term loans	16,133		22,937		22,103
Other foreign bank revolving and term loans	39,269		34,914		129,697
Total bank debt	1,361,402		1,617,851		951,800
5½% Senior Notes	300,000		300,000		300,000
4¾% Senior Notes	300,000		300,000		300,000
3¼% Senior Notes	739,245		759,460		744,380
Finance leases	22,219		—		21,543
Total debt - principal	2,722,866		2,977,311		2,317,723
Less unamortized debt issuance costs	11,875		14,639		13,109
Total debt	2,710,991		2,962,672		2,304,614
Less current portion	886,458		788,731		170,214
	$	1,824,533	$	2,173,941	$	2,134,400

On August 1, 2019, we redeemed all $300 million aggregate principal amount of our outstanding 5½% Senior Notes. See Note 15 for more information on this redemption.

At June 30, ~~2018,~~2019, the current portion of long-term debt consisted of $~~760.0~~506.0 million of bank revolving loans under our amended and restated senior secured credit facility, ~~and~~ as amended, or the Credit Agreement, $40.0 million of term loans under the Credit Agreement, $~~28.7~~39.3 million of foreign bank revolving and term ~~loans.~~

~~On April 16, 2018, we redeemed all remaining outstanding 5%~~loans, $1.2 million of finance leases and $300.0 million of our 5½% Senior Notes ~~due 2020, or the 5% Notes, ($280.0 million aggregate principal amount) at a redemption price of 100 percent of their principal amount plus accrued and unpaid interest up to the~~which were redeemed on August 1, 2019.

~~redemption date. We funded this redemption with revolving loan borrowings under our amended and restated senior secured credit facility and cash on hand.~~

On May 30, 2018, we and certain of our wholly owned subsidiaries entered into a First Amendment to Amended and Restated Credit Agreement, or the First Amendment, with the Lenders (as defined therein) and Wells Fargo National Association, as Administrative Agent. The First Amendment amended our amended and restated senior secured credit facility dated as of March 24, 2017, or the Credit Agreement.

Pursuant to the First Amendment, the date until which revolving loans under the Credit Agreement generally may be borrowed, repaid and reborrowed from time to time was extended from March 24, 2022 to May 30, 2023. The First Amendment also extended the maturity date of the term loans under the Credit Agreement from March 24, 2023 to May 30, 2024 and provides that the term loans under the Credit Agreement are payable in installments as follows (expressed as a percentage of the original principal amount of the applicable term loan outstanding on the date that it is borrowed), with the remaining outstanding principal amounts to be repaid on the maturity date of the term loans:



~~Date~~	~~Percentage~~
~~December 31, 2019~~	~~5.0~~	%
~~December 31, 2020~~	~~10.0~~	%
~~December 31, 2021~~	~~10.0~~	%
~~December 31, 2022~~	~~10.0~~	%
~~December 31, 2023~~	~~10.0~~	%

In addition, pursuant to the First Amendment, during the period from May 30, 2018 through June 30, 2018, the applicable margin for term loans and the revolving loans under the Credit Agreement was (i) with respect to base rate and Canadian prime rate loans, 0.50 percent and (ii) with respect to Eurodollar Rate, Euro Rate and CDOR Rate loans, 1.50 percent. The applicable margin for term loans and revolving loans under the Credit Agreement will be reset quarterly based on our Total Net Leverage Ratio as provided in the Credit Agreement, beginning no sooner than July 1, 2018 (with respect to the quarterly period ended March 31, 2018). Pursuant to the First Amendment, the maximum applicable margin was decreased from 1.00 percent to 0.50 percent with respect to base rate and Canadian prime rate loans and from 2.00 percent to 1.50 percent with respect to Eurodollar Rate, Euro Rate and CDOR Rate loans.

The applicable commitment fee payable by revolving borrowers on the daily average unused portion of the commitment in respect of revolving loans under the Credit Agreement was 0.30 percent per annum for the period from May 30, 2018 through June 30, 2018. Pursuant to the First Amendment, the maximum applicable commitment fee was decreased from 0.35 percent to 0.30 percent and will be reset quarterly based upon our Total Net Leverage Ratio as provided in the Credit Agreement, beginning no sooner than July 1, 2018 (with respect to the quarterly period ended March 31, 2018).

~~Additionally, the First Amendment includes other changes to the Credit Agreement, including certain changes which provide us with additional flexibility to pursue our strategic initiatives.~~

As a result of the redemption of the remaining outstanding 5% Notes and the First Amendment, we recorded a pre-tax charge for the loss on early extinguishment of debt of $2.5 million during the second quarter of 2018.

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, ~~2018~~2019 and ~~2017~~2018 and for the

three and six months then ended is unaudited)

Note 8. 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, ~~2018:~~2019:



	Carrying Amount		Fair Value
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	111,341	$	111,341

Liabilities:
Bank debt	$	1,361,402	$	1,361,402
5½% Senior Notes	300,000		301,404
4¾% Senior Notes	300,000		303,672
3¼% Senior Notes	739,245		766,841
Derivative instruments (accrued and other liabilities)	4,571		4,571

Carrying
Amount

Fair
Value
(Dollars in thousands)
Assets:
Cash and cash equivalents $ 181,220
$ 181,220

Liabilities:

Bank debt $ 1,617,851
$ 1,617,851
5½% Senior Notes 300,000
304,524
4¾% Senior Notes 300,000
286,698
3¼% Senior Notes 759,460
770,708

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, ~~2018~~2019 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, 5½% Senior Notes, 4¾% Senior Notes and 3¼% Senior 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 5½% Senior Notes, 4¾% Senior Notes and 3¼% Senior 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, ~~2018~~2019 and ~~2017~~2018 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 and natural gas cost exposures. We generally limit our use of derivative financial instruments to interest rate and natural gas swap agreements. We do not engage in

trading or other speculative uses of these financial instruments. For a financial instrument to qualify as a hedge, we must be exposed to interest rate or price risk, and the financial instrument must reduce the exposure and be designated as a hedge. Financial instruments qualifying for hedge accounting must maintain a high correlation between the hedging instrument and the item being hedged, both at inception and throughout the hedged period.

We 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 ~~become effective on March 29, 2019~~ and mature on March 24, 2023. The difference between amounts to be paid or received on our interest rate swap agreements ~~will be~~is recorded in interest and other debt expense in our Condensed Consolidated Statements of ~~Income.~~Income and was not significant for the three and six month periods ended June 30, 2019. These agreements are with financial institutions which are expected to fully perform under the terms thereof. The total fair value of our interest rate swap agreements in effect at June 30, ~~2018~~2019 was not significant.

Natural Gas Swap Agreements

We have entered into natural gas swap agreements with a major financial institution 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 months~~quarter ended June 30, ~~2018.~~2019. These agreements are with financial institutions which are expected to fully perform under the terms thereof. The total fair value of our natural gas swap agreements in effect at June 30, ~~2018~~2019 was not significant.

Foreign Currency Exchange Rate Risk

In an effort to minimize foreign currency exchange rate risk, 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 designated the 3¼% Senior Notes, which are Euro denominated, as net investment hedges. Foreign currency (losses) gains related to our net investment hedges included in accumulated other comprehensive loss for the three and six months ended June 30, ~~2018~~2019 were ~~$19.2~~$(4.7) million and ~~$9.6~~$2.4 million, respectively.

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, ~~2018~~2019 and ~~2017~~2018 and for the

three and six months then ended is unaudited)

Note 9. 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 container and closures 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 container and closures subsidiaries, which should effectively close out the investigation in Germany. Given the continued early 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 10. 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, 2018			June 30, 2017			June 30, 2018			June 30, 2017			June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
	(Dollars in thousands)												(Dollars in thousands)
Service cost	$	3,710		$	3,267		$	7,431		$	6,435		$	3,254		$	3,710		$	6,512		$	7,431
Interest cost	6,296			6,362			12,605			12,632			7,043			6,296			14,092			12,605
Expected return on plan assets	(17,122		)	(15,713		)	(34,245		)	(31,426		)	(15,112		)	(17,122		)	(30,225		)	(34,245		)
Amortization of prior service cost	34			80			69			160			21			34			40			69
Amortization of actuarial losses	1,787			1,854			3,573			3,707			4,121			1,787			8,240			3,573
Net periodic benefit credit	$	(5,295	)	$	(4,150	)	$	(10,567	)	$	(8,492	)	$	(673	)	$	(5,295	)	$	(1,341	)	$	(10,567	)

The components of the net periodic other postretirement benefit credit were as follows:



	Three Months Ended						Six Months Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
	(Dollars in thousands)
Service cost	$	22		$	32		$	44		$	63
Interest cost	184			162			369			325
Amortization of prior service credit	(581		)	(650		)	(1,163		)	(1,299		)
Amortization of actuarial gains	(166		)	(119		)	(333		)	(238		)
Net periodic benefit credit	$	(541	)	$	(575	)	$	(1,083	)	$	(1,149	)

Three Months Ended Six Months Ended
June 30,
2018 June 30,
2017 June 30,
2018 June 30,
2017
(Dollars in thousands)
Service cost $ 32
$ 34
$ 63
$ 70
Interest cost 162
176
325
352
Amortization of prior service credit (650 ) (854 ) (1,299 ) (1,707 )
Amortization of actuarial gains (119 ) (136 ) (238 ) (275 )
Net periodic benefit credit $ (575 ) $ (780 ) $ (1,149 ) $ (1,560 )

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, ~~2018~~2019 and ~~2017~~2018 and for the

three and six months then ended is unaudited)

Note 11. Income Taxes

Silgan and its subsidiaries file U.S. Federal income tax returns, as well as income tax returns in various states and foreign jurisdictions. The Internal Revenue Service, or IRS, has completed its review of the 2017 tax year with no material change to our filed federal income tax return. We have been accepted into the Compliance Assurance Program for the ~~2017~~2018 and ~~2018~~2019 tax years which provides for the review by the ~~Internal Revenue Service~~IRS of tax matters relating to our tax return prior to filing. ~~We do not expect a material change to our unrecognized tax benefits within the next twelve months.~~

In December 2017, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118, which provides guidance for the application of GAAP as it pertains to accounting for income taxes and allows us to record provisional amounts pertaining to the enacted legislation in the United States commonly referred to as the Tax Cuts and Jobs Act, or the 2017 Tax Act, during a measurement period ending in December 2018. For the three and six months ended June 30, 2018, we did not have any significant adjustments to our provisional amounts. Additional work is necessary to complete the analysis of open items, including our deferred tax assets and liabilities and our historical foreign earnings. Any subsequent adjustment to the provisional amounts will be recorded in current tax expense in the fiscal quarter of 2018 during which the analysis is completed.

Note 12. ~~Capital Stock and~~ Treasury Stock

On June 11, 2018, our stockholders approved an increase in the number of authorized shares of our common stock from 200,000,000 to 400,000,000. Accordingly, on June 11, 2018 we filed a Certificate of Amendment to our Amended and Restated Certificate of Incorporation increasing the total number of shares of capital which we have authority to issue to 410,000,000 shares, consisting of 400,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value of $0.01 per share.

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, of which we had approximately ~~$129.4~~$124.6 million remaining under this authorization for the repurchase of our common stock at June 30, ~~2018.~~2019. We did not repurchase any shares of our common stock under this authorization during the six months ended June 30, ~~2018.~~2019.

During the first six months of ~~2018,~~2019, we issued ~~339,972~~1,281,777 treasury shares which had an average cost of $~~3.12~~2.86 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 ~~107,420~~535,527 shares of our common stock at an average cost of $~~28.46~~28.48 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, ~~2018,~~ ~~64,494,600~~2019, 63,936,650 shares of our common stock were held in treasury.

Note 13. Stock-Based Compensation

We currently have one stock-based compensation plan in effect under which we have issued options and restricted stock units to our officers, other key employees and outside directors. During the first six months of ~~2018,~~ ~~374,810~~2019, 1,079,504 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 $~~10.7~~30.8 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, ~~2018~~2019 and ~~2017~~2018 and for the

three and six months then ended is unaudited)

Note 14. Business Segment Information

Reportable business segment information ~~for the three and six months ended June 30~~ was as follows:


��	Metal Containers		Closures		Plastic Containers		Corporate			Total
												Metal Containers		Closures		Plastic Containers			Corporate			Total
												(Dollars in thousands)
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
	(Dollars in thousands)
Three Months Ended June 30, 2018
Net sales	$	524,863	$	378,762	$	155,478	$	—		$	1,059,103	$	524,863	$	378,762	$	155,478		$	—		$	1,059,103
Depreciation and amortization⁽¹⁾	20,423		18,758		8,854		43			48,078		20,423		18,758		8,854			43			48,078
Rationalization charges	258		—		234		—			492		258		—		234			—			492
Segment income	48,248		47,702		13,160		(4,993		)	104,117		48,248		47,702		13,160			(4,993		)	104,117

Three Months Ended June 30, 2017
Six Months Ended June 30, 2019
Net sales	$	529,715	$	349,087	$	143,012	$	—		$	1,021,814	$	1,082,680	$	719,543	$	318,071		$	—		$	2,120,294
Depreciation and amortization⁽¹⁾	19,124		17,000		8,572		23			44,719		42,543		41,498		18,153			80			102,274
Rationalization charges	2,239		349		450		—			3,038		39,245		5,908		247			—			45,400
Segment income⁽²⁾	49,432		33,827		6,666		(14,692		)	75,233
Segment income												52,926		87,113		25,476			(10,174		)	155,341

Six Months Ended June 30, 2018
Net sales	$	1,010,818	$	749,108	$	311,459	$	—		$	2,071,385	$	1,010,818	$	749,108	$	311,459		$	—		$	2,071,385
Depreciation and amortization⁽¹⁾	40,676		37,408		17,804		64			95,952		40,676		37,408		17,804			64			95,952
Rationalization charges	740		39		416		—			1,195		740		39		416			—			1,195
Segment income	85,341		95,927		24,242		(9,209		)	196,301		85,341		95,927		24,242			(9,209		)	196,301

Six Months Ended June 30, 2017
Net sales	$	995,951	$	546,769	$	284,500	$	—		$	1,827,220
Depreciation and amortization⁽¹⁾	37,923		26,181		17,008		46			81,158
Rationalization charges	2,962		401		560		—			3,923
Segment income⁽²⁾	93,303		57,625		13,500		(32,434		)	131,994

_____________


⁽¹⁾	Depreciation and amortization excludes amortization of debt issuance costs of $0.9 million ~~and $1.0 million~~ for each of the three months ended June 30, 2019 and 2018 and ~~2017, respectively,~~$1.8 million and $2.0 ~~million and $2.2~~ million for the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.


⁽²⁾	Segment income for Metal Containers includes a $3.0 million charge for each of the three and six months ended June 30, 2017 related to the resolution of a past non-commercial legal dispute. Segment income for Corporate includes costs attributed to announced acquisitions of $9.8 million and $23.0 million for the three and six months ended June 30, 2017, respectively.

Total segment income is reconciled to income before income taxes as follows:



	Three Months Ended				Six Months Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
	(Dollars in thousands)
Total segment income	$	68,599	$	104,117	$	155,341	$	196,301
Interest and other debt expense	28,401		32,415		55,505		62,894
Income before income taxes	$	40,198	$	71,702	$	99,836	$	133,407

SILGAN HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at June 30, ~~2018~~2019 and ~~2017~~2018 and for the

three and six months then ended is unaudited)

~~Total segment income is reconciled to income before income taxes as follows:~~

Three Months Ended Six Months Ended
June 30,
2018 June 30,
2017 June 30,
2018 June 30,
2017
(Dollars in thousands)
Total segment income $ 104,117
$ 75,233
$ 196,301
$ 131,994
Interest and other debt expense 32,415
33,582
62,894
56,677
Income before income taxes $ 71,702
$ 41,651
$ 133,407
$ 75,317

Sales and segment income of our metal container business and part of our closures business 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 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.

Note 15. Subsequent Event

On August 1, 2019, we redeemed all $300.0 million aggregate principal amount of our outstanding 5½% Senior Notes at a redemption price of 100 percent of their principal amount plus accrued and unpaid interest up to the redemption date. We funded this redemption with revolving loan borrowings under the Credit Agreement and cash on hand.

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, ~~2017~~2018 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 rigid packaging for consumer goods products. We currently produce 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, personal care, home 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 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 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
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017		Three Months Ended				Six Months Ended
									June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Net sales
Metal containers	49.5	%	51.8	%	48.8	%	54.5	%	52.7	%	49.5	%	51.1	%	48.8	%
Closures	35.8		34.2		36.2		29.9		33.2		35.8		33.9		36.2
Plastic containers	14.7		14.0		15.0		15.6		14.1		14.7		15.0		15.0
Consolidated	100.0		100.0		100.0		100.0		100.0		100.0		100.0		100.0
Cost of goods sold	83.6		84.5		83.9		84.9		83.2		83.6		83.5		83.9
Gross profit	16.4		15.5		16.1		15.1		16.8		16.4		16.5		16.1
Selling, general and administrative expenses	7.4		8.6		7.5		8.6		7.3		7.4		7.4		7.5
Rationalization charges	0.1		0.3		0.1		0.2		3.6		0.1		2.2		0.1
Other pension and postretirement income	(0.9	)	(0.8	)	(1.0	)	(0.9	)	(0.4	)	(0.9	)	(0.4	)	(1.0	)
Income before interest and income taxes	9.8		7.4		9.5		7.2		6.3		9.8		7.3		9.5
Interest and other debt expense	3.1		3.3		3.0		3.1		2.6		3.1		2.6		3.0
Income before income taxes	6.7		4.1		6.5		4.1		3.7		6.7		4.7		6.5
Provision for income taxes	1.5		1.4		1.6		1.3		0.9		1.5		1.0		1.6
Net income	5.2	%	2.7	%	4.9	%	2.8	%	2.8	%	5.2	%	3.7	%	4.9	%

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


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017			June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
	(Dollars in millions)												(dollars in millions)
Net sales
Metal containers	$	524.9		$	529.7		$	1,010.8		$	995.9		$	575.6		$	524.9		$	1,082.7		$	1,010.8
Closures	378.8			349.1			749.1			546.8			363.4			378.8			719.5			749.1
Plastic containers	155.4			143.0			311.5			284.5			154.2			155.4			318.1			311.5
Consolidated	$	1,059.1		$	1,021.8		$	2,071.4		$	1,827.2		$	1,093.2		$	1,059.1		$	2,120.3		$	2,071.4

Segment income
Metal containers⁽¹⁾	$	48.2		$	49.4		$	85.3		$	93.3		$	14.0		$	48.2		$	52.9		$	85.3
Closures ⁽²⁾	47.7			33.8			96.0			57.6			46.9			47.7			87.1			96.0
Plastic containers ⁽³⁾	13.2			6.7			24.2			13.5			13.4			13.2			25.5			24.2
Corporate ⁽⁴⁾	(5.0		)	(14.7		)	(9.2		)	(32.4		)	(5.7		)	(5.0		)	(10.2		)	(9.2		)
Consolidated	$	104.1		$	75.2		$	196.3		$	132.0		$	68.6		$	104.1		$	155.3		$	196.3

⁽¹⁾Includes rationalization charges of ~~$0.3~~$39.0 million and ~~$2.2~~$0.3 million for the three months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$0.8~~$39.3 million and ~~$2.9~~$0.8 million for the six months ended June 30, 2019 and 2018, ~~and 2017,~~ respectively. ~~Includes a $3.0 million charge related to the resolution of a past non-commercial legal dispute for each of the three and six months ended June 30, 2017.~~

⁽²⁾Includes rationalization charges of ~~$0.3~~$0.2 million and ~~$0.4~~$5.9 million for the three and six months ended June 30, ~~2017,~~2019, respectively.

⁽³⁾Includes rationalization charges of ~~$0.2~~$0.1 million and ~~$0.5~~$0.2 million for the three months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$0.4~~$0.2 million and ~~$0.6~~$0.4 million for the six months ~~ending June 30, 2018 and 2017, respectively.~~

⁽⁴⁾~~Includes costs attributed to announced acquisitions of $9.8 million and $23.0 million for the three and six months~~ ended June 30, ~~2017,~~2019 and 2018, respectively.

Three Months Ended June 30, ~~2018~~2019 Compared with Three Months Ended June 30, ~~2017~~2018

Overview. Consolidated net sales were ~~$1.06~~$1.09 billion in the second quarter of ~~2018, representing~~2019, a ~~3.7~~3.2 percent increase as compared to the second quarter of ~~2017~~2018 primarily due to the pass through of higher raw material and other manufacturing costs in ~~each of our businesses,~~ the ~~impact of favorable foreign currency translation,~~metal container business and higher volumes in the metal and plastic container ~~business and~~businesses, partially offset by the impact from unfavorable foreign currency translation, a ~~more~~less favorable mix of products sold in the closures business ~~partially offset by~~and the pass through of lower ~~unit volumes~~raw material costs in the ~~metal~~plastic container ~~and closures businesses.~~business. Income before interest and income taxes for the second quarter of ~~2018 increased by $28.9~~2019 was $68.6 million, ~~or 38.4 percent,~~a $35.5 million decrease as compared to the same period in ~~2017~~2018 primarily ~~as a result~~due to $38.8 million of higher rationalization charges incurred primarily in connection with the footprint optimization plan for the metal container business and the withdrawal from the Central States Pension Plan, lower pension income in each of the businesses, the impact of unfavorable impact in the prior year period from the write-up of inventory of SDS for purchase accounting, the inclusion in the prior year period of acquisition related costs of $9.8 million, lower manufacturing costs in the metalforeign currency translation and ~~plastic container businesses,~~ a ~~charge of $3.0 million in the prior year period related to the resolution of a past non-commercial legal dispute, lower rationalization charges, a more~~less favorable mix of products sold in the closures ~~business,~~business. These decreases were partially offset by higher volumes in the metal and plastic container business, foreign currency transaction losses in the prior year period and the favorable impact from the lagged pass through of lower resin costs in the closures business. These increases were partially offset by lower unit volumes in the metal container and closures businesses and ~~higher freight costs.~~strong operating performance in all businesses. Results for the second quarters of ~~2018~~2019 and ~~2017~~2018 included rationalization charges of $39.3 million and $0.5 million, respectively. Results for the second quarters of 2019 and ~~$3.0~~2018 included other pension and postretirement income of $4.5 million ~~respectively,~~ and $9.6 million, respectively. Results for the second quarter of 2018 also included a loss on early extinguishment of debt of $2.5 million and $4.4 million, respectively. Results for the second quarters of 2018 and 2017 also included other pension and postretirement income of $9.6 million and $8.2 million, respectively. Results for the second quarter of 2017 also included costs attributed to announced acquisitions of $9.8 million. Net income for the second quarter of ~~2018~~2019 was ~~$55.3~~$31.0 million as compared to ~~$27.9~~$55.3 million for the same period in ~~2017.~~2018. Net income per diluted share for the second quarter of ~~2018~~2019 was ~~$0.50~~$0.28 as compared to ~~$0.25~~$0.50 for the same period in ~~2017.~~2018.

Net Sales. The ~~$37.3~~$34.1 million increase in consolidated net sales in the second quarter of ~~2018~~2019 as compared to the second quarter of ~~2017~~2018 was the result of higher net sales in the ~~closures and plastic~~metal container ~~businesses,~~business, partially offset by lower net sales in the ~~metal~~closures and plastic container ~~business.~~businesses.

Net sales for the metal container business ~~decreased $4.8~~increased $50.7 million, or ~~0.9~~9.7 percent, in the second quarter of ~~2018~~2019 as compared to the same period in ~~2017.~~2018. This ~~decrease~~increase was primarily the result of ~~lower unit volumes of approximately nine percent, partially offset by~~ the pass through of higher raw material and other manufacturing costs and higher unit volumes of approximately six percent, partially offset by the impact of ~~favorable~~unfavorable foreign currency translation of approximately ~~$6.0~~$5 million. ~~More than half of the decrease~~The increase in unit volumes was ~~due to a seasonal customer adjusting its inventory levels in the current period. Volumes were also impacted by a delay in the fruit and vegetable pack~~primarily as a result of ~~unfavorable weather conditions worldwide,~~higher volumes for a seasonal customer ~~plant shutdown~~that had been destocking inventory in the ~~fruit market and the competitive loss of a smaller, lower margin customer. These decreases in volume were partially offset by~~prior year period as well as continued growth in ~~certain other markets such as the~~ pet food ~~and protein markets.~~volumes.

Net sales for the closures business ~~increased $29.7~~decreased $15.4 million, or ~~8.5~~4.1 percent, in the second quarter of ~~2018~~2019 as compared to the same period in ~~2017.~~2018. This ~~increase~~decrease was primarily the result of the impact of ~~favorable~~unfavorable foreign currency translation of approximately ~~$13.0~~$9 million ~~the pass through of higher raw material costs~~ and a ~~more~~less favorable mix of products ~~sold, partially~~sold. Unit volumes were up slightly in the second quarter of 2019 as compared to the prior year quarter, with higher volume demand in the U.S. beverage markets largely offset by lower unit volumes ~~of approximately two percent principally as a result of lower demand for single-serve beverages.~~in international markets primarily attributable to weather challenges.

Net sales for the plastic container business ~~increased $12.4~~decreased $1.2 million, or ~~8.7~~0.8 percent, in the second quarter of ~~2018~~2019 as compared to the same period in ~~2017.~~2018. This ~~increase~~decrease was ~~principally~~primarily due to the pass through of ~~higher~~lower raw material costs ~~higher volumes of approximately four percent~~ and the impact of ~~favorable~~unfavorable foreign currency translation of approximately ~~$1.0 million.~~$1 million, partially offset by higher volumes of approximately one percent.

Gross Profit. Gross profit margin increased ~~0.9~~0.4 percentage points to ~~16.4~~16.8 percent in the second quarter of ~~2018~~2019 as compared to the same period in ~~2017~~2018 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 decreased ~~1.2 percentage points~~slightly to ~~7.4~~7.3 percent ~~for~~in the second quarter of ~~2018~~2019 as compared to ~~8.6 percent for~~ the same period in ~~2017.~~2018. Selling, general and administrative expenses ~~decreased $10.4~~increased $1.8 million to ~~$78.3~~$80.1 million for the second quarter of ~~2018~~2019 as compared to ~~$88.7~~$78.3 million for the same period in 2017. These decreases were primarily due to the inclusion in the prior year period of both $9.8 million of costs attributed to the acquisition of SDS and a $3.0 million charge related to the resolution of a past non-commercial legal dispute.2018.

Income before Interest and Income Taxes. Income before interest and income taxes for the second quarter of ~~2018 increased~~2019 decreased by ~~$28.9~~$35.5 million ~~or 38.4 percent,~~ as compared to the second quarter of ~~2017,~~2018, and margins ~~increased~~decreased to ~~9.8~~6.3 percent from ~~7.4~~9.8 percent over the same periods. The ~~increase~~decrease in income before interest and income taxes and margins was primarily the result higher rationalization charges. In addition, each of ~~higher segment income~~the businesses was unfavorably impacted by the reduction in pension income. Rationalization charges were $39.3 million and $0.5 million in the ~~closures~~second quarters of 2019 and ~~plastic container businesses as well as acquisition related costs of $9.8 million incurred in the prior year period, slightly offset by lower segment income in the metal container business.~~2018, respectively.

Segment income of the metal container business for the second quarter of ~~2018~~2019 decreased ~~$1.2~~$34.2 million ~~or 2.4 percent,~~ as compared to the same period in ~~2017,~~2018, and segment income margin decreased ~~slightly~~ to 2.4 percent from 9.2 percent over the same periods. The decrease in segment income and segment income margin was principally due to $38.7 million of higher rationalization charges and lower pension income, partially offset by higher unit volumes and strong operating performance. Rationalization charges were $39.0 million and $0.3 million in the second quarters of 2019 and 2018, respectively. Rationalization charges in the second quarter of 2019 were primarily a result of the recently announced footprint optimization plan and the withdrawal from ~~9.3~~the Central States Pension Plan.

Segment income of the closures business for the second quarter of 2019 decreased $0.8 million as compared to the same period in 2018, while segment income margin increased to 12.9 percent from 12.6 percent over the same periods. The decrease in segment income was primarily attributable to lower unit volumes and higher freight expense, partially offset by lower manufacturing costs, a charge of $3.0 million in the prior year period related to the resolution of a past non-commercial legal dispute and lower rationalization charges. Rationalization charges were $0.3 million and $2.2 million in the second quarters of 2018 and 2017, respectively.

Segment income of the closures business for the second quarter of 2018 increased $13.9 million, or 41.1 percent, as compared to the same period in 2017, and segment income margin increased to 12.6 percent from 9.7 percent over the same periods. The increase in segment income was primarily due to the impact of unfavorable ~~impact in the prior year period from the write-up of inventory of SDS for purchase accounting of $11.9 million,~~foreign currency translation, lower pension income and a ~~more~~less favorable mix of products sold, as a result of strong volumes of dispensing closures, foreign currency transaction losses in the prior year period and the favorable impact from the lagged pass through to customers of lower resin costs, partially offset by ~~lower unit volumes. The increase in segment income margin was primarily due to the unfavorable impact in the prior year period from the write-up of inventory of SDS for purchase accounting.~~strong operating performance.

Segment income of the plastic container business for the second quarter of ~~2018~~2019 increased ~~$6.5~~$0.2 million ~~or 97.0 percent,~~ as compared to the same period in ~~2017,~~2018, and segment income margin increased to ~~8.5~~8.7 percent from ~~4.7~~8.5 percent over the same periods. The increase in segment income was primarily attributable to higher volumes, ~~and~~partially offset by lower ~~manufacturing costs.~~pension income.

Interest and Other Debt Expense. Interest and other debt expense before loss on early extinguishment of debt for the second quarter of ~~2018 increased $0.8~~2019 decreased $1.5 million to ~~$29.9~~$28.4 million as compared to ~~$29.1~~$29.9 million in the same period in ~~2017~~2018 primarily due to ~~higher weighted average interest rates, partially offset by~~ lower average outstanding borrowings ~~largely~~ as a result of the ~~partial~~ repayment of ~~acquisition borrowings under the Credit Agreement~~debt at the end of ~~2017.~~2018. Loss on early extinguishment of debt of $2.5 million in the second quarter of 2018 was the result of the redemption of all remaining ~~outstanding~~ 5% Senior Notes in April 2018 and the completion of ~~the First Amendment~~an amendment to the Credit Agreement in May 2018. ~~Loss on early extinguishment of debt of $4.4 million in the second quarter of 2017 was primarily a result of the partial redemption of the 5% Notes in April 2017.~~

Provision for Income Taxes. The effective tax rates were ~~22.8~~23.0 percent and ~~33.0~~22.8 percent for the second quarters of ~~2018~~2019 and ~~2017,~~2018, respectively. The effective tax rate in the second quarter of 2019 was favorably impacted by the resolution of a prior year tax audit. The effective tax rate in the second quarter of 2018 ~~primarily~~ benefitted from ~~the 2017 Tax Act and~~ the timing of certain state tax rate ~~changes in the current year quarter.~~changes.

Six Months Ended June 30, ~~2018~~2019 Compared with Six Months Ended June, ~~2017~~2018

Overview. Consolidated net sales were ~~$2.07~~$2.12 billion in the first six months of ~~2018, representing~~2019, a ~~13.4~~2.4 percent increase as compared to the first six months of ~~2017~~2018 primarily as a result of ~~the acquisition of SDS in April 2017,~~ the pass through of higher raw material costs in each of our businesses ~~the impact of favorable foreign currency translation~~ and higher volumes in the metal and plastic container ~~business,~~businesses, partially offset by the impact of unfavorable foreign currency translation and lower unit volumes in the ~~metal container business and legacy~~ closures ~~operations and a less favorable mix of products sold in the metal container~~ business. Income before interest and income taxes for the first six months of ~~2018 increased~~2019 decreased by ~~$64.3~~$41.0 million ~~or 48.7 percent,~~ as compared to the same period in ~~2017~~2018 primarily ~~as a result~~due to $44.2 million of higher rationalization charges incurred primarily in connection with the ~~inclusion in~~footprint optimization plan for the ~~prior year of acquisition related costs of $23.0 million,~~metal container business and the ~~benefit~~withdrawal from the ~~acquisition~~Central States Pension Plan, lower pension income across all businesses, the impact of ~~SDS, the~~ unfavorable ~~impact in the prior year from the write-up of inventory of SDS for purchase accounting of $11.9 million,~~foreign currency translation and slightly lower ~~manufacturing costs in each of our businesses, higher~~unit volumes in the ~~plastic~~closures business. These decreases were partially offset by strong operating performance in all businesses, a larger seasonal inventory build in the metal container business ~~a charge of $3.0 million~~ in the ~~prior~~current year ~~related~~period as compared to the ~~resolution of a past non-commercial legal dispute, lower rationalization charges, foreign currency transaction losses~~same period in ~~the prior year period and~~2018, the favorable impact from the lagged pass through of lower resin costs in the closures ~~business. These increases were partially offset by lower unit~~business and higher volumes in the metal and plastic container business and legacy closures operations, the unfavorable impact from the planned lower seasonal inventory build in the current year period as compared to the prior year period in the metal container business, a less favorable mix of products sold in the metal container business and higher freight costs.businesses. Results for the first six months of ~~2018~~2019 and ~~2017~~2018 included rationalization charges of $45.4 million and $1.2 million, respectively. Results for the first six months of 2019 and ~~$3.9 million, respectively,~~2018 also included other pension and ~~loss on early extinguishment~~postretirement income of ~~debt of $2.5~~$9.0 million and ~~$7.1~~$19.2 million, respectively. Results for the first six months of 2018 ~~and 2017~~ also included ~~other pension and postretirement income~~a loss on early extinguishment of ~~$19.2 million and $16.6 million, respectively. Results for the first six months~~debt of ~~2017 also included costs attributed to announced acquisitions of $23.0~~$2.5 million. Net income for the first six months of ~~2018~~2019 was ~~$101.1~~$77.7 million as compared to ~~$51.2~~$101.1 million for the same period in ~~2017.~~2018. Net income per diluted share for the first six months of ~~2018~~2019 was ~~$0.91~~$0.70 as compared to ~~$0.46~~$0.91 for the same period in ~~2017.~~2018.

Net Sales. The ~~$244.2~~$48.9 million increase in consolidated net sales in the first six months of ~~2018~~2019 as compared to the first six months of ~~2017~~2018 was the result of higher net sales in ~~each of our businesses.~~the metal and plastic container businesses, partially offset by lower net sales in the closures business.

Net sales for the metal container business increased ~~$14.9~~$71.9 million, or ~~1.5~~7.1 percent, in the first six months of ~~2018~~2019 as compared to the same period in ~~2017.~~2018. This increase was primarily the result of the pass through of higher raw material and other manufacturing

costs and higher unit volumes of approximately one percent, partially offset by the impact of ~~favorable~~unfavorable foreign currency translation of approximately ~~$15.0 million, partially offset by lower unit volumes of approximately six percent and a less favorable mix of products sold.~~$10 million. The ~~decrease~~increase in unit volumes was primarily the result of higher volumes for a seasonal customer ~~adjusting its~~that had been destocking inventory ~~levels~~ in the ~~second quarter of 2018, a customer plant shutdown~~prior year period as well as continued growth in pet food volumes, partially offset by the ~~fruit market, lower unit volumes with certain~~unfavorable impact from customers who bought ahead of 2019 steel inflation in the fourth quarter of ~~2017~~2018 and the prior year loss of a ~~delay in the fruit and vegetable pack as a result of unfavorable weather conditions worldwide, partially offset by continued growth in certain other markets such as the pet food and protein markets.~~smaller customer.

Net sales for the closures business ~~increased $202.3~~decreased $29.6 million, or ~~37.0~~4.0 percent, in the first six months of ~~2018~~2019 as compared to the same period in ~~2017.~~2018. This ~~increase~~decrease was primarily the result of the ~~acquisition of SDS, the~~ impact of ~~favorable~~unfavorable foreign currency translation of approximately ~~$24.0~~$22 million and lower unit volumes of approximately one percent, partially offset by the pass through of higher raw material ~~costs, partially offset by lower unit volumes of approximately three percent in the legacy closures operations principally as a result of a decline in sales for the single-serve beverage market.~~costs.

Net sales for the plastic container business increased ~~$27.0~~$6.6 million, or ~~9.5~~2.1 percent, in the first six months of ~~2018~~2019 as compared to the same period in ~~2017.~~2018. This increase was primarily due to the pass through of higher raw material costs and higher volumes of approximately ~~five~~two percent, ~~and~~partially offset by the impact of ~~favorable~~unfavorable foreign currency translation of approximately ~~$2.0~~$2 million.

Gross Profit. Gross profit margin increased ~~1.0~~0.4 percentage ~~point~~points to ~~16.1~~16.5 percent in the first six months of ~~2018~~2019 as compared to the same period in ~~2017~~2018 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 decreased ~~1.1 percentage points~~slightly to ~~7.5~~7.4 percent for the first six months of ~~2018~~2019 as compared to ~~8.6 percent for~~ the same period in ~~2017.~~2018. Selling, general and administrative expenses ~~decreased $2.3~~increased $2.8 million to ~~$155.0~~$157.8 million for the first six months of ~~2018~~2019 as compared to ~~$157.3~~$155.0 million for the same period in 2017. These decreases were primarily due to the inclusion in the prior year period of $23.0 million of costs attributed to the acquisition of SDS and a $3.0 million charge related to the resolution of a past non-commercial legal dispute, partially offset by the inclusion of SDS for the full period in 2018.

Income before Interest and Income Taxes. Income before interest and income taxes for the first six months of ~~2018 increased~~2019 decreased by ~~$64.3~~$41.0 million ~~or 48.7 percent,~~ as compared to the first six months of ~~2017,~~2018, and margins ~~increased~~decreased to ~~9.5~~7.3 percent from ~~7.2~~9.5 percent over the same periods. The ~~increase~~decrease in income before interest and income taxes was primarily the result of higher ~~segment income in~~rationalization charges. Rationalization charges were $45.4 million and $1.2 million for the ~~closures~~first six months of 2019 and ~~plastic container businesses as well as acquisition related costs of $23.0 million incurred in the prior year period, partially offset by a decrease in segment income in the metal container business.~~2018, respectively.

Segment income of the metal container business for the first six months of ~~2018~~2019 decreased ~~$8.0~~$32.4 million ~~or 8.6 percent,~~ as compared to the same period in ~~2017,~~2018, and segment income margin decreased to ~~8.4~~4.9 percent from ~~9.4~~8.4 percent over the same periods. The decrease in segment income and segment income margin was primarily attributable to $38.5 million of higher rationalization charges and lower ~~unit volumes,~~pension income, partially offset by the ~~unfavorable~~favorable impact from ~~the planned lower~~a larger seasonal inventory build in the current year period as compared to the ~~prior year~~same period ~~a less favorable mix of products sold~~in 2018, strong operating performance and higher freight costs, partially offset by a $3.0 million charge in the prior year period related to the resolution of a past non-commercial legal dispute, lower manufacturing costs and lower rationalization charges.unit volumes. Rationalization charges were ~~$0.8~~$39.3 million and ~~$2.9~~$0.8 million in the first six months of 2019 and 2018, respectively. Rationalization charges in the first six months of 2019 were principally related to the recently announced footprint optimization plan and ~~2017, respectively.~~the withdrawal from the Central States Pension Plan.

Segment income of the closures business for the first six months of ~~2018 increased $38.4~~2019 decreased $8.9 million, ~~or 66.7 percent,~~ as compared to the same period in ~~2017,~~2018, and segment income margin ~~increased~~decreased to ~~12.8~~12.1 percent from ~~10.5~~12.8 percent over the same periods. The ~~increase~~decrease in segment income was primarily due to rationalization charges of $5.9 million principally related to the ~~inclusion~~announced shutdown of ~~segment income from~~a metal closures manufacturing facility in Spain, the ~~SDS operations for the full period in 2018, the~~impact of unfavorable ~~impact in the prior year period of the write-up of inventory of SDS for purchase accounting of $11.9 million, lower manufacturing costs,~~ foreign currency ~~transaction losses in the prior year period~~translation, lower pension income and lower unit volumes, partially offset by strong operating performance and the favorable impact from the lagged pass through of lower resin ~~costs, partially offset by lower unit volumes in the legacy closures operations.~~costs.

Segment income of the plastic container business for the first six months of ~~2018~~2019 increased ~~$10.7~~$1.3 million ~~or 79.3 percent,~~ as compared to the same period in ~~2017,~~2018, and segment income margin increased to ~~7.8~~8.0 percent from ~~4.7~~7.8 percent over the same periods. The increase in segment income was primarily attributable to higher volumes and lower manufacturing ~~costs.~~costs, partially offset by lower pension income.

Interest and Other Debt Expense. Interest and other debt expense before loss on early extinguishment of debt for the first six months of ~~2018 increased $10.8~~2019 decreased $4.9 million to ~~$60.4~~$55.5 million as compared to ~~$49.6~~$60.4 million in the same period in ~~2017~~2018 primarily due to ~~higher~~lower average outstanding ~~borrowings principally as a result of borrowings for the acquisition of SDS and higher weighted average interest rates.~~borrowings. Loss on early extinguishment of debt of $2.5 million in the first six months of 2018 was primarily a result of the redemption of all remaining outstanding 5% Senior Notes in April 2018 and the completion of ~~the First Amendment~~an amendment to the Credit Agreement in May 2018. ~~Loss on early extinguishment of debt of $7.1 million in the first six months of 2017 was a result of the~~

~~prepayment of outstanding U.S. term loans and Euro term loans under our previous senior secured credit facility and the partial redemption of the 5% Notes in April 2017.~~

Provision for Income Taxes. The effective tax rates were ~~24.2~~22.2 percent and ~~32.1~~24.2 percent for the first six months of ~~2018~~2019 and ~~2017,~~2018, respectively. The effective tax rate in the first six months of ~~2018 benefited~~2019 benefitted from the ~~2017 Tax Act.~~timing of certain tax deductions recognized in such period 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 ~~April 16, 2018,~~August 1, 2019, we redeemed all ~~remaining outstanding 5% Notes ($280.0~~$300.0 million aggregate principal ~~amount)~~amount of our outstanding 5½% Senior Notes at a redemption price of 100 percent of their principal amount plus accrued and unpaid interest up to the redemption date. We funded this redemption with revolving loan borrowings under the Credit Agreement and cash on hand.

~~On May 30, 2018, we completed~~For the First Amendment to the Credit Agreement, which extends the maturity dates by approximately fourteen months for term loans and the revolving loan facility under the Credit Agreement, lowers the margin on borrowings under the Credit Agreement and provides us with additional flexibility with regard to strategic initiatives.

~~You should also read Note 7 to our Condensed Consolidated Financial Statements for the three and~~ six months ended June 30, ~~2018 included elsewhere~~2019, we used net borrowings of revolving loans of $416.0 million to fund cash used in ~~this Quarterly Report.~~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 positive effect of exchange rate changes of $0.7 million) by $38.5 million.

For the six months ended June 30, 2018, we used net borrowings of revolving loans of $716.3 million to fund repayments of long-term debt of $284.6 million, cash used in operations of $92.9 million, decreases in outstanding checks of $87.8 million, net capital expenditures and other investing activities of $90.8 million, dividends paid on our common stock of $22.4 million, repurchases of our common stock of $3.0 million and debt issuance costs of $2.9 million and to increase cash and cash equivalents (including the negative effect of exchange rate changes of $4.2 million) by $127.7 million.

For the six months ended June 30, 2017, we used aggregate proceeds of $1,789.2 million from term loan borrowings under the Credit Agreement and the issuance of our 4¾% Senior Notes due 2025 and our 3¼% Senior Notes due 2025 and net borrowings of revolving loans of $433.4 million to fund the acquisition of SDS for $1,022.1 million, repayments of long-term debt of $744.4 million, cash used in operations of $138.8 million, decreases in outstanding checks of $79.0 million, net capital expenditures of $80.8 million, dividends paid on our common stock of $20.3 million, debt issuance costs of $16.6 million and repurchases of our common stock of $3.2 million and to increase cash and cash equivalents by $117.4 million.

At June 30, ~~2018,~~2019, we had ~~$760.0~~$506.0 million of revolving loans outstanding under the Credit ~~Agreement, which includes revolving loan borrowings used to fund the redemption of the remaining outstanding 5% Notes.~~Agreement. After taking into account outstanding letters of credit, the available portion of revolving loans under the Credit Agreement at June 30, ~~2018~~2019 was ~~$410.5~~$667.3 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 ~~2018~~2019 with all of these covenants.

Rationalization Charges

In June 2019, we announced a footprint optimization plan for our metal container business, which includes the closing of our metal container manufacturing facilities in Mt. Vernon, Missouri and Waupun, Wisconsin anticipated to occur in the fourth quarter of 2019. These plant closings, in conjunction with the prior ratification of a new labor agreement at our Menomonee Falls, Wisconsin metal container manufacturing facility that provided for the withdrawal for that facility from the Central States Pension Plan, will result in our complete withdrawal from the Central States Pension Plan. We estimate net rationalization charges for this plan of $3.7 million for the plant closings and $56.4 million for the withdrawal from the Central States Pension Plan. We recorded total rationalization charges for this plan of $38.7 million in the second quarter of 2019, consisting of $2.5 million for the plant closings and $36.2 million to recognize the present value of the estimated withdrawal liability related to the Central States Pension Plan. Remaining expenses and cash expenditures for the plant closings are $1.2 million and $2.9 million, respectively, and are expected through 2021. Remaining expenses for the accretion of interest for the withdrawal liability related to the Central States Pension Plan are expected to average approximately $1.0 million per year and be recognized annually for the next twenty years, and remaining cash expenditures related to the withdrawal from the Central States Pension Plan are expected to be approximately $2.8 million annually for the next twenty years. Cost savings from this footprint optimization plan are not expected to be material to our results of operations or cash flows.

We continually evaluate cost reduction opportunities across each of our businesses, 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 ~~$1.3~~$1.9 million and ~~$2.1~~$1.3 million for the six months ended June 30, 2019 and 2018, respectively. Exclusive of the footprint optimization plan for our metal container business and ~~2017, respectively. Additional cash spending under~~withdrawal from the Central States Pension Plan discussed above, remaining expenses for our rationalization plans of ~~$3.3~~$4.2 million isare expected primarily through 2019 and remaining cash expenditures for our rationalization plans of $4.7 million are expected through 2023.

You should also read Note 4 to our Condensed Consolidated Financial Statements for the three and six months ended June 30, ~~2018~~2019 included elsewhere in this Quarterly Report.

~~Recently Issued Accounting Pronouncements~~

In February 2016, the FASB issued an ASU that amends existing guidance for certain leases by lessees. This amendment will require an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. In addition, this amendment clarifies the presentation requirements of the effects of leases in the statement of income and statement of cash flows. This amendment will be effective for us on January 1, 2019. Early adoption is permitted. This amendment is required to be adopted using a modified retrospective approach. We are currently evaluating the impact of this amendment on our financial position, results of operations and cash flows.

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, ~~2017.~~2018. Since such filing, other than the changes discussed in Notes 7 and 815 to our Condensed Consolidated Financial Statements for the three and six months ended June 30, ~~2018~~2019 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 April 6, 2017, we acquired SDS. You should read Note 3 to our Condensed Consolidated Financial Statements for the three and six months ended June 30, 2018 included elsewhere in this Quarterly Report for further information. We are currently in the process of integrating the internal controls and procedures of SDS 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 SDS in our annual assessment of the effectiveness of our internal control over financial reporting for our 2018 fiscal year.

Part II. Other Information

Item 6. Exhibits



Exhibit Number		Description

~~3.1~~10.1		Amendment to the Silgan Holdings Inc. Amended and Restated ~~Certificate of Incorporation of Silgan Holdings Inc. (incorporated by reference to Exhibit 3.1 filed with our Current Report on Form 8-K, dated June 13, 2006, Commission File No. 000-22117).~~

~~3.2~~		Amendment to the Amended and Restated Certificate of Incorporation of Silgan Holdings Inc. to amend the stockholder voting standard (incorporated by reference to Exhibit 3.1 filed with our Current Report on Form 8-K, dated June 11, 2010, Commission File No. 000-22117).

~~3.3~~		Amendment to the Amended and Restated Certificate of Incorporation of Silgan Holdings Inc. to increase the number of authorized shares of our common stock (incorporated by reference to Exhibit 3.2 filed with our Current Report on Form 8-K, dated June 11, 2010, Commission File No. 000-22117).

~~3.4~~		Amendment to the Amended and Restated Certificate of Incorporation of Silgan Holdings Inc. to permit an increase in the size of the Board of Directors for a period of time, to increase the number of authorized shares of our common stock and to make an immaterial administrative change (incorporated by reference to Exhibit 3.1 filed with our Current Report on Form 8-K, dated June 15, 2018, Commission File No. 000-22117).

12		~~Ratio of Earnings to Fixed Charges for the three and six months ended June 30, 2018 and 2017.~~2004 Stock Incentive Plan

31.1		Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2		Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

32.1		Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.

32.2		Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.

101.INS		XBRL Instance ~~Document.~~Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

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.



	SILGAN HOLDINGS INC.



Dated: August 8, ~~2018~~2019	/s/ Robert B. Lewis	��
	Robert B. Lewis
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial and
	Accounting Officer)

-28-



	June 30, 2018			June 30, 2017			Dec. 31, 2017
	(Dollars in thousands)
Raw materials	$	252,792		$	209,183		$	233,410
Work-in-process	136,210			142,043			124,396
Finished goods	514,911			535,204			433,937
Other	12,629			12,876			12,370
	916,542			899,306			804,113
Adjustment to value inventory at cost on the LIFO method	(82,823		)	(68,419		)	(82,823		)
	$	833,719		$	830,887		$	721,290

Large accelerated filer ~~[ X ]~~

Accelerated filer ~~[ ]~~

Non-accelerated filer ~~[ ] (Do not check if a smaller reporting company)~~

Smaller reporting company ~~[ ]~~

Emerging growth company ~~[ ]~~