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 September 30, 20182019
OR
[  ]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)
Delaware06-1269834
(State or other jurisdiction(I.R.S. Employer
of incorporation or organization)Identification No.)
  
4 Landmark Square 
Stamford,Connecticut06901
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareSLGNNasdaq 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.
Large accelerated filer  [ X ]

           Accelerated filer  [   ]

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

           Smaller reporting company  [   ]
            Emerging growth company [ ]


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


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


As of October 31, 2018,2019, the number of shares outstanding of the Registrant’s common stock $0.01 par value, was 110,617,896.110,768,306.


SILGAN HOLDINGS INC.
  
TABLE OF CONTENTS
  
 Page No.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  






Part I. Financial Information
Item 1. Financial Statements

SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)


Sept. 30, 2018 Sept. 30, 2017 Dec. 31, 2017Sept. 30, 2019 Sept. 30, 2018 Dec. 31, 2018
(unaudited) (unaudited)  (unaudited) (unaudited)  
Assets          
          
Current assets:          
Cash and cash equivalents$171,369
 $199,186
 $53,533
$117,389
 $171,369
 $72,819
Trade accounts receivable, net783,306
 702,307
 454,637
751,404
 783,306
 511,332
Inventories690,378
 704,384
 721,290
703,206
 690,378
 634,806
Prepaid expenses and other current assets67,492
 62,463
 62,462
61,310
 67,492
 71,177
Total current assets1,712,545
 1,668,340
 1,291,922
1,633,309
 1,712,545
 1,290,134
          
Property, plant and equipment, net1,502,231
 1,472,321
 1,489,872
1,522,541
 1,502,231
 1,517,510
Goodwill1,156,051
 1,160,453
 1,171,454
1,128,151
 1,156,051
 1,148,302
Other intangible assets, net392,144
 422,050
 417,088
358,046
 392,144
 383,448
Other assets, net295,228
 297,926
 275,113
431,970
 295,228
 239,900
$5,058,199
 $5,021,090
 $4,645,449
$5,074,017
 $5,058,199
 $4,579,294
          
Liabilities and Stockholders’ Equity 
  
  
 
  
  
          
Current liabilities: 
  
  
 
  
  
Revolving loans and current portion of long-term debt$733,404
 $640,390
 $108,789
$841,430
 $733,404
 $170,214
Trade accounts payable552,897
 487,775
 659,629
550,557
 552,897
 712,739
Accrued payroll and related costs71,658
 69,044
 66,257
69,191
 71,658
 68,773
Accrued liabilities101,895
 122,129
 123,602
156,599
 101,895
 127,342
Total current liabilities1,459,854
 1,319,338
 958,277
1,617,777
 1,459,854
 1,079,068
          
Long-term debt2,186,275
 2,465,780
 2,438,502
1,809,955
 2,186,275
 2,134,400
Deferred income taxes279,449
 395,181
 262,394
274,107
 279,449
 268,036
Other liabilities220,704
 217,688
 220,211
403,648
 220,704
 216,525
          
Stockholders’ equity: 
  
  
 
  
  
Common stock1,751
 1,751
 1,751
1,751
 1,751
 1,751
Paid-in capital272,301
 258,653
 262,201
285,061
 272,301
 276,062
Retained earnings1,970,875
 1,651,760
 1,809,845
2,118,860
 1,970,875
 1,997,785
Accumulated other comprehensive loss(212,256) (170,263) (188,973)(287,923) (212,256) (268,808)
Treasury stock(1,120,754) (1,118,798) (1,118,759)(1,149,219) (1,120,754) (1,125,525)
Total stockholders’ equity911,917
 623,103
 766,065
968,530
 911,917
 881,265
$5,058,199
 $5,021,090
 $4,645,449
$5,074,017
 $5,058,199
 $4,579,294


See accompanying notes.

SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three and nine months ended September 30, 2019 and 2018
(Dollars and shares in thousands, except per share amounts)
(Unaudited)




 Three Months Ended Nine Months Ended
 Sept. 30, 2018 Sept. 30, 2017 Sept. 30, 2018 Sept. 30, 2017
          
Net sales$1,306,999
 $1,266,930
 $3,378,383
 $3,094,150
Cost of goods sold1,102,892
 1,061,289
 2,840,991
 2,611,836
Gross profit204,107
 205,641
 537,392
 482,314
Selling, general and administrative expenses73,690
 75,149
 228,691
 232,461
Rationalization charges288
 561
 1,483
 4,485
Other pension and postretirement income(8,326) (8,635) (27,536) (25,192)
Income before interest and income taxes138,455
 138,566
 334,754
 270,560
Interest and other debt expense before loss on
    early extinguishment of debt
28,199
 30,583
 88,602
 80,207
Loss on early extinguishment of debt
 
 2,493
 7,052
Interest and other debt expense28,199
 30,583
 91,095
 87,259
Income before income taxes110,256
 107,983
 243,659
 183,301
Provision for income taxes25,517
 35,601
 57,857
 59,762
Net income$84,739
 $72,382
 $185,802
 $123,539
        
        
Earnings per share: 
       
Basic net income per share$0.77
 $0.66
 $1.68
 $1.12
Diluted net income per share$0.76
 $0.65
 $1.66
 $1.11
        
Dividends per share (a)$0.10
 $0.09
 $0.30
 $0.27
        
Weighted average number of shares: 
  
    
Basic110,657
 110,391
 110,599
 110,327
Effect of dilutive securities1,036
 1,036
 1,010
 996
Diluted111,693
 111,427
 111,609
 111,323
 Three Months Ended Nine Months Ended
 Sept. 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018
          
Net sales$1,321,342
 $1,306,999
 $3,441,635
 $3,378,383
Cost of goods sold1,113,727
 1,102,892
 2,884,510
 2,840,991
Gross profit207,615
 204,107
 557,125
 537,392
Selling, general and administrative expenses76,065
 73,690
 233,816
 228,691
Rationalization charges3,195
 288
 48,594
 1,483
Other pension and postretirement income(4,340) (8,326) (13,320) (27,536)
Income before interest and income taxes132,695
 138,455
 288,035
 334,754
Interest and other debt expense before loss on
    early extinguishment of debt
26,767
 28,199
 82,272
 88,602
Loss on early extinguishment of debt1,676
 
 1,676
 2,493
Interest and other debt expense28,443
 28,199
 83,948
 91,095
Income before income taxes104,252
 110,256
 204,087
 243,659
Provision for income taxes22,978
 25,517
 45,117
 57,857
Net income$81,274
 $84,739
 $158,970
 $185,802
        
Earnings per share: 
       
Basic net income per share$0.73
 $0.77
 $1.43
 $1.68
Diluted net income per share$0.73
 $0.76
 $1.43
 $1.66
        
Weighted average number of shares:       
Basic111,058
 110,657
 110,985
 110,599
Effect of dilutive securities463
 1,036
 554
 1,010
Diluted111,521
 111,693
 111,539
 111,609
        
See accompanying notes.


(a) The per share amount of dividends declared on common stock for the nine months ended September 30, 2017 has
been retroactively adjusted for the two-for-one stock split of our issued common stock effected on May 26, 2017.



 SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three and nine months ended September 30, 2019 and 2018
(Dollars in thousands)
(Unaudited)







Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
Sept. 30, 2018 Sept. 30, 2017 Sept. 30, 2018 Sept. 30, 2017Sept. 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018
              
Net income$84,739
 $72,382
 $185,802
 $123,539
$81,274
 $84,739
 $158,970
 $185,802
Other comprehensive (loss) income, net of tax:

 

    
Other comprehensive income (loss), net of tax:

 

    
Changes in net prior service credit and actuarial losses807
 558
 2,441
 1,816
2,625
 807
 7,745
 2,441
Change in fair value of derivatives476
 (51) 673
 (526)(159) 476
 (2,647) 673
Foreign currency translation(4,576) 14,369
 (26,397) 52,303
(25,016) (4,576) (24,213) (26,397)
Other comprehensive (loss) income(3,293) 14,876
 (23,283) 53,593
Other comprehensive loss(22,550) (3,293) (19,115) (23,283)
Comprehensive income$81,446
 $87,258
 $162,519
 $177,132
$58,724
 $81,446
 $139,855
 $162,519
 
See accompanying notes.

 SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 20182019 and 20172018
(Dollars in thousands)
(Unaudited)






2018 20172019 2018
Cash flows provided by (used in) operating activities:      
Net income$185,802
 $123,539
$158,970
 $185,802
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
 
  
 
  
Depreciation and amortization146,246
 129,734
156,780
 146,246
Rationalization charges1,483
 4,485
48,594
 1,483
Stock compensation expense11,162
 11,052
12,669
 11,162
Loss on early extinguishment of debt2,493
 7,052
1,676
 2,493
Other changes that provided (used) cash, net of effects from acquisition: 
  
Other changes that provided (used) cash: 
  
Trade accounts receivable, net(271,636) (285,901)(250,783) (271,636)
Inventories(32,743) (2,895)(75,414) (32,743)
Trade accounts payable(11,185) 1,725
(63,609) (11,185)
Accrued liabilities(11,227) 16,003
(10,475) (11,227)
Other, net(7,304) (9,247)19,181
 (7,304)
Net cash provided by (used in) operating activities13,091
 (4,453)
Net cash (used in) provided by operating activities(2,411) 13,091
      
Cash flows provided by (used in) investing activities: 
  
 
  
Purchase of business, net of cash acquired
 (1,028,729)
Capital expenditures(134,636) (124,163)(166,848) (134,636)
Other, net236
 539
509
 236
Net cash used in investing activities(134,400) (1,152,353)(166,339) (134,400)
      
Cash flows provided by (used in) financing activities: 
  
 
  
Borrowings under revolving loans923,639
 1,108,208
1,139,329
 923,639
Repayments under revolving loans(266,477) (680,986)(464,759) (266,477)
Proceeds from issuance of long-term debt
 1,789,200
Repayments of long-term debt(286,200) (755,037)(308,161) (286,200)
Changes in outstanding checks - principally vendors(87,795) (78,944)(83,670) (87,795)
Dividends paid on common stock(33,843) (30,373)(38,615) (33,843)
Debt issuance costs(2,866) (16,643)
 (2,866)
Repurchase of common stock under stock plan(3,057) (4,123)(27,364) (3,057)
Net cash provided by financing activities243,401
 1,331,302
216,760
 243,401
      
Effect of exchange rate changes on cash and cash equivalents(4,256) 
(3,440) (4,256)
      
Cash and cash equivalents: 
  
 
  
Net increase117,836
 174,496
44,570
 117,836
Balance at beginning of year53,533
 24,690
72,819
 53,533
Balance at end of period$171,369
 $199,186
$117,389
 $171,369
      
Interest paid, net$104,040
 $78,528
$97,630
 $104,040
Income taxes paid, net39,400
 50,226
31,067
 39,400


See accompanying notes.

SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
For the three and nine months ended September 30, 20182019 and 20172018
(Dollars and shares in thousands)thousands, except per share amounts)
(Unaudited)





        Accumulated Other Comprehensive Loss    Three Months Ended Nine Months Ended 
Common Stock       Total Stockholders’ EquitySept. 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018 
Shares Outstanding Par Value Paid-in Capital Retained Earnings Treasury Stock         
Balance at December 31, 201655,051
 $876
 $249,763
 $1,558,594
 $(223,856) $(1,115,962) $469,415
Net income
 
 
 123,539
 
 
 123,539
Other comprehensive income
 
 
 
 53,593
 
 53,593
Dividends declared on common stock
 
 
 (30,373) 
 
 (30,373)
Common stock - shares outstanding        
Balance at beginning of period111,176
 110,618
 110,430
 110,385
 
Net issuance of treasury stock for vested restricted stock units
 
 746
 233
 
Repurchases of common stock(408) 
 (408) 
 
Balance at end of period110,768
 110,618
 110,768
 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 period280,636
 268,559
 276,062
 262,201
 
Stock compensation expense
 
 11,052
 
 
 
 11,052
4,425
 3,742
 12,669
 11,162
 
Net issuance of treasury stock for vested restricted stock units180
 
 (1,287) 
 
 (2,836) (4,123)
 
 (3,670) (1,062) 
Two-for-one stock split55,142
 875
 (875) 
 
 
 
Balance at September 30, 2017110,373
 $1,751
 $258,653
 $1,651,760
 $(170,263) $(1,118,798) $623,103
Balance at December 31, 2017110,385
 $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 period285,061
 272,301
 285,061
 272,301
 
        
Retained earnings        
Balance at beginning of period2,049,995
 1,897,417
 1,997,785
 1,809,845
 
Net income
 
 
 185,802
 
 
 185,802
81,274
 84,739
 158,970
 185,802
 
Dividends declared on common stock(12,409) (11,281) (37,302) (33,833) 
Adoption of accounting standards updates related to leases in 2019 and revenue recognition in 2018
 
 (593) 9,061
 
Balance at end of period2,118,860
 1,970,875
 2,118,860
 1,970,875
 
        
Accumulated other comprehensive loss        
Balance at beginning of period(265,373) (208,963) (268,808) (188,973) 
Other comprehensive loss
 
 
 
 (23,283) 
 (23,283)(22,550) (3,293) (19,115) (23,283) 
Dividends declared on common stock
 
 
 (33,833) 
 
 (33,833)
Stock compensation expense
 
 11,162
 
 
 
 11,162
Balance at end of period(287,923) (212,256) (287,923) (212,256) 
        
Treasury stock        
Balance at beginning of period(1,137,107) (1,120,754) (1,125,525) (1,118,759) 
Net issuance of treasury stock for vested restricted stock units233
 
 (1,062) 
 
 (1,995) (3,057)
 
 (11,582) (1,995) 
Balance at September 30, 2018110,618
 $1,751
 $272,301
 $1,970,875
 $(212,256) $(1,120,754) $911,917
Repurchases of common stock(12,112) 
 (12,112) 
 
Balance at end of period(1,149,219) (1,120,754) (1,149,219) (1,120,754) 
Total stockholders' equity$968,530
 $911,917
 $968,530
 $911,917
 
        
Dividends declared on common stock per share$0.11
 $0.10
 $0.33
 $0.30
 
        
        


See accompanying notes.




SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 20182019 and 20172018 and for the
three and nine months then ended is unaudited)









Note 1.               Significant Accounting Policies


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


The Condensed Consolidated Balance Sheet at December 31, 20172018 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.


Goodwill and Other Intangible Assets.We review goodwill and other indefinite-lived intangible assets for impairment as of July 1 of each year and more frequently if circumstances indicate a possible impairment. We determined that our goodwill and other indefinite-lived intangible assets were not impaired in our annual 20182019 assessment performed during the third quarter.


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 $6.9 million and $20.0 million, increased selling, general and administrative expenses by $1.7 million and $5.2 million and reported other pension and postretirement income of $8.6 million and $25.2 million in our Condensed Consolidated Statement of Income for the three and nine months ended September 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 entityrequired us to recognize assets and liabilities on the balance sheet for the rights

SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)






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. We will adoptadopted this amendment on January 1, 2019. In adopting this amendment, we expect to elect2019 using the transition method, which will allowallowed us to recognize the effects of applying this amendment as a cumulative effect to retained earnings as of January 1, 20192019. 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 and not restate comparative periods forallowed us to carryforward our lease classifications determined under the effectsprevious guidance. In addition, we elected to retain our previously determined assumptions concerning options to extend or terminate our leases. As a result of this amendment. We are currently evaluating the impactadoption of this amendment, we recognized additional long-term assets of $160.8 million, additional related lease liabilities of $161.4 million and reduced retained earnings by $0.6 million all on January 1, 2019. The adoption of this amendment did not have a material impact on our financial position, results of operations andor cash flows. See Note 2 for further information.






SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2019 and 2018 and for the
three and nine months then ended is unaudited)


Note 2.               RevenueLeases


Our revenues are primarily derivedWe 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 sale of rigid packaging products to customers. We recognize revenuelease. Lease right-of-use assets and lease liabilities are recognized at the amount we expectcommencement 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 entitledexercised.
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 exchangerent, 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 recorded on the balance sheet. The depreciable life of lease right-of-use assets is generally the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise for promised goodssuch assets.
We recognized total lease expense of $18.7 million and $52.6 million for whichthe three and nine months ended September 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 September 30, 2019.

The aggregate annual maturities of operating lease liabilities are as follows (dollars in thousands):
Three months ended December 31, 2019$11,459
202044,800
202138,031
202230,278
202325,417
Thereafter93,783
Total lease payments243,768
Less imputed interest(48,051)
Total$195,717


Operating lease right-of-use assets as of September 30, 2019 were recorded in our Condensed Consolidated Balance Sheets as other assets, net of $187.3 million. Operating lease liabilities of $195.7 million as of September 30, 2019 were recorded in our Condensed Consolidated Balance Sheets as accrued liabilities of $35.3 million and other liabilities of $160.4 million. At September 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 transferred control to customers. If the consideration agreed tocertain leases that qualify as finance leases. Finance lease right-of-use assets as of September 30, 2019 were recorded in a contract includes a variable amount,our Condensed Consolidated Balance Sheets as property, plant and equipment, net of $33.9 million. Finance lease liabilities of $33.4 million as of September 30, 2019 were recorded in our Condensed Consolidated Balance Sheets as revolving loans and current portion of long term-debt of $1.6 million and long-term debt of $31.8 million.
At September 30, 2019, 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 recognizeddid not have any significant operating or finance leases that had not commenced.



SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at a point in time for standard promised goods at the time of shipment when titleSeptember 30, 2019 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 us2018 and for which we have an enforceable right of payment for production completed. The production cycle for customer contracts subject to over time recognitionthe
three and nine months then ended 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.unaudited)


Note 3.               Revenue

The following tables present our revenues disaggregated by reportable business segment and geography as they best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.


Revenues by business segment were as follows:
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
Sept. 30, 2018 Sept. 30, 2017 Sept. 30, 2018 Sept. 30, 2017Sept. 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018
(Dollars in thousands)(Dollars in thousands)
Metal containers$797,768
 $772,382
 $1,808,585
 $1,768,333
$822,262
 $797,768
 $1,904,941
 $1,808,585
Closures360,816
 357,343
 1,109,924
 904,112
353,436
 360,816
 1,072,979
 1,109,924
Plastics148,415
 137,205
 459,874
 421,705
145,644
 148,415
 463,715
 459,874
$1,306,999
 $1,266,930
 $3,378,383
 $3,094,150
$1,321,342
 $1,306,999
 $3,441,635
 $3,378,383


Revenues by geography were as follows:
 Three Months Ended Nine Months Ended
 Sept. 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018
 (Dollars in thousands)
North America$1,078,187
 $1,056,099
 $2,747,518
 $2,651,225
Europe and other243,155
 250,900
 694,117
 727,158
 $1,321,342
 $1,306,999
 $3,441,635
 $3,378,383

 Three Months Ended Nine Months Ended
 Sept. 30, 2018 Sept. 30, 2017 Sept. 30, 2018 Sept. 30, 2017
 (Dollars in thousands)
North America$1,056,099
 $1,011,573
 $2,651,225
 $2,488,620
Europe and other250,900
 255,357
 727,158
 605,530
 $1,306,999
 $1,266,930
 $3,378,383
 $3,094,150


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.
 

SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2018 and 2017 and for the
three and nine months then ended is unaudited)






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 $73.4 million, $77.2 million, and $72.5 million as of September 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 $706.1 million and our inventories would have been $753.3 million as of September 30, 2018.



SILGAN HOLDINGS INC.
Note 3.               AcquisitionNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Information at September 30, 2019 and 2018 and for the
On April 6, 2017, we acquired the specialty closuresthree and dispensing systems operations of WestRock Company, now operating under the name Silgan Dispensing Systems, or SDS. During the threenine months then 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.is unaudited)




Note 4.               Rationalization Charges


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. Rationalization charges by business segment were $0.3 millionas follows:
 Three Months Ended Nine Months Ended
 Sept. 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018
 (Dollars in thousands)
Metal containers$3,035
 $72
 $42,280
 $812
Closures72
 111
 5,979
 150
Plastic containers88
 105
 335
 521
 $3,195
 $288
 $48,594
 $1,483


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 $0.6Waupun, 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 September 30, 2018plant closings and 2017, respectively, and $1.5 million and $4.5$56.4 million for the withdrawal from the Central States Pension Plan. We recorded total rationalization charges for this plan of $40.7 million in the first nine months ended September 30, 2018of 2019 largely to recognize the present value of the estimated withdrawal liability related to the Central States Pension Plan. Remaining expenses and 2017, respectively. Undercash expenditures for the plant closings are not expected to be significant. 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, beginning in 2020.
Rationalization charges in the first nine months 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 $1.8 million and $2.8 million for the nine months ended September 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 42,556
 808
 5,230
 48,594
Utilized and currency translation (2,543) (1,241) (5,230) (9,014)
Balance at September 30, 2019 $40,143
 $1,049
 $
 $41,192


Rationalization reserves as of September 30, 20182019 were recorded in our Condensed Consolidated Balance Sheets as accrued liabilities of $5.3 million and other liabilities of $0.7 million$35.9 million. Exclusive of the footprint optimization plan for our metal container business and $1.0 million, respectively. Remainingwithdrawal from the Central States Pension Plan discussed above, remaining expenses for our rationalization plans of $1.1$2.4 million are expected primarily within the next twelve months. Remainingthrough 2019 and remaining cash expenditures for our rationalization plans of $2.8$5.0 million are expected through 2023.





SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 20182019 and 20172018 and for the
three and nine 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
 (2,975) (24,213) (27,188)
Amounts reclassified from accumulated other
    comprehensive loss
7,745
 328
 
 8,073
 Other comprehensive loss7,745
 (2,647) (24,213) (19,115)
Balance at September 30, 2019$(146,721) $(3,655) $(137,547) $(287,923)
 Unrecognized Net
Defined Benefit
Plan Costs
 Change in Fair
Value of
Derivatives
 Foreign
Currency
Translation
 Total
 (Dollars in thousands)
Balance at December 31, 2017$(104,822) $(89) $(84,062) $(188,973)
Other comprehensive loss before reclassifications(917) 663
 (26,397) (26,651)
Amounts reclassified from accumulated other
    comprehensive loss
3,358
 10
 
 3,368
 Other comprehensive loss2,441
 673
 (26,397) (23,283)
Balance at September 30, 2018$(102,381) $584
 $(110,459) $(212,256)

 
The amounts reclassified to earnings from the unrecognized net defined benefit plan costs component of accumulated other comprehensive loss for the three and nine months ended September 30, 20182019 were net (losses) of $(2.3)$(3.5) million and $(4.4)$(10.3) million, respectively, excluding income tax benefits of $0.6$0.8 million and $1.1$2.6 million, respectively.  For the three and nine months ended September 30, 2018,2019, these net (losses) consisted of amortization of net actuarial (losses) of $(1.7)$(4.1) million and $(5.0)$(12.0) million and amortization of net prior service (cost) credit of $(0.6)$0.6 million and $0.6$1.7 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 nine months ended September 30, 20182019 were not significant.


Other comprehensive income before reclassifications related to foreign currency translation for the three and nine months ended September 30, 20182019 consisted of (i) foreign currency (losses) related to translation of quarter end financial statements of foreign
subsidiaries utilizing a functional currency other than the U.S. dollar of $(7.5)$(36.1) million and $(36.9)$(37.7) million, respectively, (ii) foreign currency gains related to intra-entity foreign currency transactions that are of a long-term investment nature of $1.1$0.3 million and $1.3$0.9 million, respectively, and (iii) foreign currency gains related to our net investment hedges of $2.4$14.1 million and $12.0$16.5 million, respectively, excluding income tax (provisions) of $(0.6)$(3.3) million and $(2.8)$(3.9) million, respectively. See Note 8 for further discussion.























SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 20182019 and 20172018 and for the
three and nine months then ended is unaudited)








Note 6.               Inventories


Inventories consisted of the following:
 
 Sept. 30, 2019 Sept. 30, 2018 Dec. 31, 2018
 (Dollars in thousands)
Raw materials$275,015
 $250,051
 $288,860
Work-in-process127,590
 125,336
 123,574
Finished goods413,864
 384,815
 335,180
Other12,620
 12,999
 13,075
 829,089
 773,201
 760,689
Adjustment to value inventory
   at cost on the LIFO method
(125,883) (82,823) (125,883)
 $703,206
 $690,378
 $634,806

 
Sept. 30,
2018
 
Sept. 30,
2017
 
Dec. 31,
2017
 (Dollars in thousands)
Raw materials$250,051
 $211,959
 $233,410
Work-in-process125,336
 132,071
 124,396
Finished goods384,815
 415,645
 433,937
Other12,999
 13,128
 12,370
 773,201
 772,803
 804,113
Adjustment to value inventory
   at cost on the LIFO method
(82,823) (68,419) (82,823)
 $690,378
 $704,384
 $721,290




Note 7.               Long-Term Debt


Long-term debt consisted of the following:
 Sept. 30, 2019 Sept. 30, 2018 Dec. 31, 2018
 (Dollars in thousands)
Bank debt     
Bank revolving loans$766,000
 $698,000
 $
U.S. term loans800,000
 800,000
 800,000
Canadian term loans15,943
 23,335
 22,103
Other foreign bank revolving and term loans37,062
 36,143
 129,697
Total bank debt1,619,005
 1,557,478
 951,800
5½% Senior Notes
 300,000
 300,000
4¾% Senior Notes300,000
 300,000
 300,000
3¼% Senior Notes708,630
 754,260
 744,380
Finance leases33,440
 21,950
 21,543
Total debt - principal2,661,075
 2,933,688
 2,317,723
Less unamortized debt issuance costs9,690
 14,009
 13,109
Total debt2,651,385
 2,919,679
 2,304,614
Less current portion841,430
 733,404
 170,214
 $1,809,955
 $2,186,275
 $2,134,400

 
Sept. 30,
2018
 
Sept. 30,
2017
 Dec. 31, 2017
 (Dollars in thousands)
Bank debt     
Bank revolving loans$698,000
 $598,751
 $
U.S. term loans800,000
 800,000
 800,000
Canadian term loans23,335
 27,365
 27,147
Other foreign bank revolving and term loans36,143
 49,596
 76,798
Total bank debt1,557,478
 1,475,712
 903,945
5% Senior Notes
 280,000
 280,000
5½% Senior Notes300,000
 300,000
 300,000
4¾% Senior Notes300,000
 300,000
 300,000
3¼% Senior Notes754,260
 767,910
 780,325
Other obligations21,950
 
 
Total debt - principal2,933,688
 3,123,622
 2,564,270
Less unamortized debt issuance costs14,009
 17,452
 16,979
Total debt2,919,679
 3,106,170
 2,547,291
Less current portion733,404
 640,390
 108,789
 $2,186,275
 $2,465,780
 $2,438,502


At September 30, 2018,2019, the current portion of long-term debt consisted of $698.0$766.0 million of bank revolving loans under our amended and restated senior secured credit facility, and $35.4as amended, or the Credit Agreement, $40.0 million of term loans under the Credit Agreement, $33.8 million of other foreign bank revolving and term loans and other obligations.$1.6 million of finance leases.


On April 16, 2018,August 1, 2019, we redeemed all remaining$300.0 million aggregate principal amount of our outstanding 5%5½% Senior Notes due 2020,2022, or the 5%5½% 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 redemption date. We funded this redemption with revolving loan borrowings under our amended and restated senior secured credit facilitythe Credit Agreement and cash on hand. As a result of this redemption, we recorded a pre-tax charge for the loss on early extinguishment of debt of $1.7 million during the third quarter of 2019 for the write-off of unamortized debt issuance costs.



SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 20182019 and 20172018 and for the
three and nine months then ended is unaudited)








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:

DatePercentage
December 31, 20195.0%
December 31, 202010.0%
December 31, 202110.0%
December 31, 202210.0%
December 31, 202310.0%

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 September 30, 2018 and 2017 and for the
three and nine 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 September 30, 2018:2019:


 
Carrying
Amount
 
Fair
Value
 (Dollars in thousands)
Assets:   
Cash and cash equivalents$117,389
 $117,389
    
Liabilities: 
  
Bank debt$1,619,005
 $1,619,005
4¾% Senior Notes300,000
 307,761
3¼% Senior Notes708,630
 728,394
Derivative instruments (accrued and other liabilities)4,779
 4,779

 
Carrying
Amount
 
Fair
Value
 (Dollars in thousands)
Assets:   
Cash and cash equivalents$171,369
 $171,369
    
Liabilities: 
  
Bank debt$1,557,478
 $1,557,478
5½% Senior Notes300,000
 304,089
4¾% Senior Notes300,000
 287,982
3¼% Senior Notes754,260
 779,769


Fair Value Measurements


GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).  GAAP classifies the inputs used to measure fair value into a hierarchy consisting of three levels.  Level 1 inputs represent unadjusted quoted prices in active markets for identical assets or liabilities.  Level 2 inputs represent unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.  Level 3 inputs represent unobservable inputs for the asset or liability.  Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


Financial Instruments Measured at Fair Value


The financial assets and liabilities that were measured on a recurring basis at September 30, 20182019 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 September 30, 20182019 and 20172018 and for the
three and nine months then ended is unaudited)







We utilize certain derivative financial instruments to manage a portion of our interest rate and natural gas cost exposures.  We generally limit our use of derivative financial instruments to interest rate and natural gas swap agreements.  We do not engage in trading or other speculative uses of these financial instruments. For a financial instrument to qualify as a hedge, we must be exposed to interest rate or price risk, and the financial instrument must reduce the exposure and be designated as a hedge.  Financial instruments qualifying for hedge accounting must maintain a high correlation between the hedging instrument and the item being hedged, both at inception and throughout the hedged period.


We 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 beis recorded in interest and other debt expense in our Condensed Consolidated Statements of Income.Income and was not significant for the three and nine month periods ended September 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 September 30, 20182019 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 nine monthsmonth periods ended September 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 September 30, 20182019 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 gains related to our net investment hedges included in accumulated other comprehensive loss for the three and nine months ended September 30, 20182019 were $2.4$14.1 million and $12.0$16.5 million, respectively.




SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 20182019 and 20172018 and for the
three and nine 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 Nine Months EndedThree Months Ended Nine Months Ended
Sept. 30, 2018 Sept. 30, 2017 Sept. 30, 2018 Sept. 30, 2017Sept. 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018
(Dollars in thousands)(Dollars in thousands)
Service cost$3,411
 $3,532
 $10,842
 $9,967
$2,871
 $3,411
 $9,383
 $10,842
Interest cost6,348
 6,482
 18,953
 19,114
7,149
 6,348
 21,241
 18,953
Expected return on plan assets(17,137) (15,832) (51,382) (47,258)(15,200) (17,137) (45,425) (51,382)
Amortization of prior service cost34
 75
 103
 235
46
 34
 86
 103
Amortization of actuarial losses1,877
 1,501
 5,450
 5,208
4,084
 1,877
 12,324
 5,450
Net periodic benefit credit$(5,467) $(4,242) $(16,034) $(12,734)$(1,050) $(5,467) $(2,391) $(16,034)
 

The components of the net periodic other postretirement benefit (credit) cost (credit) were as follows:
 Three Months Ended Nine Months Ended
 Sept. 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018
 (Dollars in thousands)
Service cost$16
 $15
 $60
 $78
Interest cost200
 158
 569
 483
Amortization of prior service (credit) cost(586) 561
 (1,749) (738)
Amortization of actuarial gains(33) (167) (366) (405)
Net periodic benefit (credit) cost$(403) $567
 $(1,486) $(582)
 Three Months Ended Nine Months Ended
 Sept. 30, 2018 Sept. 30, 2017 Sept. 30, 2018 Sept. 30, 2017
 (Dollars in thousands)
Service cost$15
 $9
 $78
 $79
Interest cost158
 168
 483
 520
Amortization of prior service cost (credit)561
 (857) (738) (2,564)
Amortization of actuarial gains(167) (172) (405) (447)
Net periodic benefit cost (credit)$567
 $(852) $(582) $(2,412)






SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 20182019 and 20172018 and for the
three and nine months then ended is unaudited)








Note 11.               Income Taxes


Silgan and its subsidiaries file U.S. Federal income tax returns, as well as income tax returns in various states and foreign jurisdictions. The Internal Revenue Service, or IRS, has completed its review of the 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 20172018 and 20182019 tax years which provides for the review by the Internal Revenue Service, or IRS of tax matters relating to our tax return prior to filing. In the next twelve months, we expect that our reserve for unrecognized tax benefits will decrease by approximately $4.0 million primarily related to tax attributes acquired from and expenses related to certain acquisitions, as we anticipate the expiration of the applicable statutes of limitation with respect to certain tax matters and resolving certain other outstanding tax matters with the IRS.


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 nine months ended September 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 fourth quarter of 2018.



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, 2021,2021. During the nine months ended September 30, 2019, we repurchased an aggregate of which407,540 shares of our common stock at an average price per share of $29.70, for a total purchase price of $12.1 million. At September 30, 2019, we had approximately $129.4$112.5 million remaining under this authorization for the repurchase of our common stock at September 30, 2018. We did not repurchase any shares of our common stock under this authorization during the nine months ended September 30, 2018.stock.


During the first nine months of 2018,2019, we issued 339,9721,281,777 treasury shares which had an average cost of $3.122.86 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 107,420535,527 shares of our common stock at an average cost of $28.4628.48 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 September 30, 2018, 64,494,6002019, 64,344,190 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 nine months of 2018, 374,8102019, 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 $10.730.8 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 September 30, 20182019 and 20172018 and for the
three and nine months then ended is unaudited)








Note 14.             Business Segment Information


Reportable business segment information for the three and nine months ended September 30 was as follows:


Metal
Containers
 Closures 
Plastic
Containers
 Corporate Total
Metal
Containers
 Closures 
Plastic
Containers
 Corporate Total
(Dollars in thousands)
Three Months Ended September 30, 2019         
Net sales$822,262
 $353,436
 $145,644
 $
 $1,321,342
Depreciation and amortization(1)
21,477
 20,847
 9,512
 39
 51,875
Rationalization charges3,035
 72
 88
 
 3,195
Segment income81,128
 44,784
 11,425
 (4,642) 132,695
(Dollars in thousands)         
Three Months Ended September 30, 2018          
  
  
  
  
Net sales$797,768
 $360,816
 $148,415
 $
 $1,306,999
$797,768
 $360,816
 $148,415
 $
 $1,306,999
Depreciation and amortization(1)
19,823
 18,378
 9,171
 43
 47,415
19,823
 18,378
 9,171
 43
 47,415
Rationalization charges72
 111
 105
 
 288
72
 111
 105
 
 288
Segment income86,928
 47,349
 8,446
 (4,268) 138,455
86,928
 47,349
 8,446
 (4,268) 138,455
                  
Three Months Ended September 30, 2017 
  
  
  
  
Nine Months Ended September 30, 2019         
Net sales$772,382
 $357,343
 $137,205
 $
 $1,266,930
$1,904,941
 $1,072,979
 $463,715
 $
 $3,441,635
Depreciation and amortization(1)
19,250
 17,457
 8,636
 22
 45,365
64,021
 62,345
 27,665
 120
 154,151
Rationalization charges326
 134
 101
 
 561
42,280
 5,979
 335
 
 48,594
Segment income(2)
92,222
 45,322
 6,444
 (5,422) 138,566
Segment income134,053
 131,896
 36,902
 (14,816) 288,035
                  
Nine Months Ended September 30, 2018          
  
  
  
  
Net sales$1,808,585
 $1,109,924
 $459,874
 $
 $3,378,383
$1,808,585
 $1,109,924
 $459,874
 $
 $3,378,383
Depreciation and amortization(1)
60,500
 55,786
 26,975
 107
 143,368
60,500
 55,786
 26,975
 107
 143,368
Rationalization charges812
 150
 521
 
 1,483
812
 150
 521
 
 1,483
Segment income172,268
 143,277
 32,687
 (13,478) 334,754
172,268
 143,277
 32,687
 (13,478) 334,754
         
Nine Months Ended September 30, 2017 
  
  
  
  
Net sales$1,768,333
 $904,112
 $421,705
 $
 $3,094,150
Depreciation and amortization(1)
57,172
 43,638
 25,644
 68
 126,522
Rationalization charges3,288
 535
 662
 
 4,485
Segment income(2)
185,525
 102,947
 19,944
 (37,856) 270,560


_____________


(1) 
Depreciation and amortization excludes amortization of debt issuance costs of $0.9$0.8 million and $1.0$0.9 million for the three months ended September 30, 20182019 and 2017,2018, respectively, and $2.9$2.6 million and $3.2$2.9 million for the nine months ended September 30, 20182019 and 2017,2018, respectively.
(2)
Segment income for Metal Containers includes a $3.0 million charge for the nine months ended September 30, 2017 related to the resolution of a past non-commercial legal dispute. Segment income for Corporate includes costs attributed to announced acquisitions of $0.8 million and $23.8 million for the three and nine months ended September 30, 2017, respectively.






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

 Three Months Ended Nine Months Ended
 Sept. 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018
 (Dollars in thousands)
Total segment income$132,695
 $138,455
 $288,035
 $334,754
Interest and other debt expense28,443
 28,199
 83,948
 91,095
Income before income taxes$104,252
 $110,256
 $204,087
 $243,659

SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 20182019 and 20172018 and for the
three and nine months then ended is unaudited)








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

 Three Months Ended Nine Months Ended
 Sept. 30, 2018 Sept. 30, 2017 Sept. 30, 2018 Sept. 30, 2017
 (Dollars in thousands)
Total segment income$138,455
 $138,566
 $334,754
 $270,560
Interest and other debt expense28,199
 30,583
 91,095
 87,259
Income before income taxes$110,256
 $107,983
 $243,659
 $183,301


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 November 4, 2019, we announced that we had entered into an agreement to sell $400 million aggregate principal amount of 4⅛% Senior Notes due 2028 in a private offering. These new senior notes will mature on February 1, 2028, and interest on these new senior notes will accrue and be payable semi-annually on April 1st and October 1st of each year, commencing April 1, 2020. We intend to use the net proceeds of approximately $394.6 million from this senior notes offering to repay outstanding revolving loans under our Credit Agreement that were used to redeem our 5½% Notes in August 2019 and for other general corporate purposes, including acquisitions, stock repurchases and repayments of other indebtedness. The closing for the sale of these new senior notes is expected to occur on November 12, 2019.

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, 20172018 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 Nine Months Ended
 Sept. 30, 2018 Sept. 30, 2017 Sept. 30, 2018 Sept. 30, 2017Three Months Ended Nine Months Ended
    Sept. 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018
Net sales             
Metal containers 61.0 % 61.0 % 53.5 % 57.2 %62.2 % 61.0 % 55.3 % 53.5 %
Closures 27.6
 28.2
 32.9
 29.2
26.8
 27.6
 31.2
 32.9
Plastic containers 11.4
 10.8
 13.6
 13.6
11.0
 11.4
 13.5
 13.6
Consolidated 100.0
 100.0
 100.0
 100.0
100.0
 100.0
 100.0
 100.0
Cost of goods sold 84.4
 83.8
 84.1
 84.4
84.3
 84.4
 83.8
 84.1
Gross profit 15.6
 16.2
 15.9
 15.6
15.7
 15.6
 16.2
 15.9
Selling, general and administrative expenses 5.6
 5.9
 6.8
 7.5
5.8
 5.6
 6.8
 6.8
Rationalization charges 
 0.1
 
 0.2
0.2
 
 1.4
 
Other pension and postretirement income (0.6) (0.7) (0.8) (0.8)(0.3) (0.6) (0.4) (0.8)
Income before interest and income taxes 10.6
 10.9
 9.9
 8.7
10.0
 10.6
 8.4
 9.9
Interest and other debt expense 2.2
 2.4
 2.7
 2.8
2.1
 2.2
 2.5
 2.7
Income before income taxes 8.4
 8.5
 7.2
 5.9
7.9
 8.4
 5.9
 7.2
Provision for income taxes 1.9
 2.8
 1.7
 1.9
1.7
 1.9
 1.3
 1.7
Net income 6.5 % 5.7 % 5.5 % 4.0 %6.2 % 6.5 % 4.6 % 5.5 %


Summary unaudited results of operations for the periods presented are provided below.
 Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
 Sept. 30, 2018 Sept. 30, 2017 Sept. 30, 2018 Sept. 30, 2017Sept. 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018
 (Dollars in millions)(dollars in millions)
Net sales               
Metal containers $797.8
 $772.4
 $1,808.6
 $1,768.3
$822.3
 $797.8
 $1,904.9
 $1,808.6
Closures 360.8
 357.3
 1,109.9
 904.1
353.4
 360.8
 1,073.0
 1,109.9
Plastic containers 148.4
 137.2
 459.9
 421.7
145.6
 148.4
 463.7
 459.9
Consolidated $1,307.0
 $1,266.9
 $3,378.4
 $3,094.1
$1,321.3
 $1,307.0
 $3,441.6
 $3,378.4
               
Segment income               
Metal containers (1)
 $86.9
 $92.2
 $172.3
 $185.5
$81.1
 $86.9
 $134.1
 $172.3
Closures (2)
 47.3
 45.3
 143.3
 103.0
44.8
 47.3
 131.9
 143.3
Plastic containers (3)
 8.5
 6.5
 32.7
 20.0
11.4
 8.5
 36.9
 32.7
Corporate (4)
 (4.2) (5.4) (13.5) (37.9)(4.6) (4.2) (14.9) (13.5)
Consolidated $138.5
 $138.6
 $334.8
 $270.6
$132.7
 $138.5
 $288.0
 $334.8
 
(1) Includes rationalization charges of $0.1$3.0 million and $0.4$0.1 million for the three months ended September 30, 20182019 and 2017,2018, respectively, and $0.8$42.3 million and $3.3$0.8 million for the nine months ended September 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 the nine months ended September 30, 2017.
(2) Includes rationalization charges of $0.1 million for each of the three months ended September 30, 2019 and 2018 and 2017$6.0 million and $0.2 million and $0.5 million for the nine months ended September 30, 2019 and 2018, and 2017, respectively.
(3) Includes rationalization charges of $0.1 million for each of the three months ended September 30, 2019 and 2018 and 2017$0.3 million and $0.5 million and $0.7 million for the nine months ending September 30, 2018 and 2017, respectively.
(4) Includes costs attributed to announced acquisitions of $0.8 million and $23.8 million for the three and nine months ended September 30, 2017,2019 and 2018, respectively.








Three Months Ended September 30, 20182019 Compared with Three Months Ended September 30, 20172018


Overview.  Consolidated net sales were $1.31$1.32 billion in the third quarter of 2018, representing2019, a 3.21.1 percent increase as compared to the third quarter of 20172018 primarily due to the pass through of higher raw material and other manufacturing costs in each of our businesses,the metal container business and higher volumes in the plastic container business, andpartially offset by a moreless favorable mix of products sold, in the metal container business, partially offset by lower unit volumes in the metal container business and the impact offrom unfavorable foreign currency translation.translation and the pass through of lower raw material costs in the plastic container business. Income before interest and income taxes for the third quarter of 20182019 was essentially flat$132.7 million, a $5.8 million decrease as compared to the same period in 2017, with higher volumes and2018 primarily due to lower manufacturing costs in the plastic container business,pension income, a moreless favorable mix of products sold in the metal container and closures businesses, the favorable impact in the metal container business of the contractual pass through to customers of indexed inflation as compared to the unfavorable impact in the prior year period from the contractual pass through of indexed deflation, lower costs in the closures business due largely to synergies realized from the SDS acquisition and foreign currency transaction losses in the prior year period in the metal container business beinghigher rationalization charges. These decreases were partially offset by lower unit volumesproduction efficiencies in the metal container business, higher freight expense,volumes and strong operating performance in the unfavorableplastic container business, the favorable impact from the lagged pass through to customers of lower resin costs in the current year period as compared to an unfavorable impact from higher resin costs in the plastic containerprior year period in the closures business and closures businesses andthe prior year unfavorable impact of costs associated with the start-up of the new manufacturing facility in the plastic container business.Fort Smith, Arkansas. Results for the third quarters of 20182019 and 20172018 included rationalization charges of $3.2 million and $0.3 million, respectively, and $0.6 million, respectively. Results for the third quarters of 2018 and 2017 also included other pension and postretirement income of $8.3$4.3 million and $8.6$8.3 million, respectively. Results for the third quarter of 20172019 also included costs attributed to announced acquisitionsa loss on early extinguishment of $0.8debt of $1.7 million. Net income for the third quarter of 20182019 was $84.7$81.3 million as compared to $72.4$84.7 million for the same period in 2017.2018.  Net income per diluted share for the third quarter of 20182019 was $0.76$0.73 as compared to $0.65$0.76 for the same period in 2017.2018.


Net Sales.  The $40.1$14.3 million increase in consolidated net sales in the third quarter of 20182019 as compared to the third quarter of 20172018 was the result of higher net sales across all of ourin the metal container business, partially offset by lower net sales in the closures and plastic container businesses.


Net sales for the metal container business increased $25.4$24.5 million, or 3.33.1 percent, in the third quarter of 20182019 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, partially offset by a less favorable mix of products sold and the impact of unfavorable foreign currency translation of approximately $4 million. Unit volumes were flat versus the prior year period, as lower volumes with U.S. fruit and vegetable pack customers were offset by volume increases with other customers, including for soup.

Net sales for the closures business decreased $7.4 million, or 2.1 percent, in the third quarter of 2019 as compared to the same period in 2018.  This decrease was primarily the result of the impact of unfavorable foreign currency translation of approximately $7 million and a less favorable mix of products sold. Unit volumes were flat in the third 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 in international markets.

Net sales for the plastic container business decreased $2.8 million, or 1.9 percent, in the third quarter of 2019 as compared to the same period in 2018. This decrease was primarily due to a less favorable mix of products sold and the pass through of lower raw material costs, partially offset by higher volumes of approximately three percent.

Gross Profit.  Gross profit margin increased 0.1 percentage points to 15.7 percent in the third quarter of 2019 as compared to the same period in 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 increased to 5.8 percent in the third quarter of 2019 as compared to 5.6 percent in the same period in 2018. Selling, general and administrative expenses increased $2.4 million to $76.1 million for the third quarter of 2019 as compared to $73.7 million for the same period in 2018.

Income before Interest and Income Taxes.  Income before interest and income taxes for the third quarter of 2019 decreased by $5.8 million as compared to the third quarter of 2018, and margins decreased to 10.0 percent from 10.6 percent over the same periods. The decrease in income before interest and income taxes was primarily the result of higher rationalization charges and lower pension income. In addition, the metal container and closures businesses had slightly lower segment income, partially offset by higher segment income in the plastic container business. Rationalization charges were $3.2 million and $0.3 million in the third quarters of 2019 and 2018, respectively.

Segment income of the metal container business for the third quarter of 2019 decreased $5.8 million as compared to the same period in 2018, and segment income margin decreased to 9.9 percent from 10.9 percent over the same periods.  The decrease in segment income was principally due a less favorable mix of products sold, higher rationalization charges and lower pension income, partially offset by production efficiencies in the U.S. due in part to a larger amount of finished goods inventory produced in the current year quarter in anticipation of higher sales volume. Rationalization charges were $3.0 million and $0.1 million in the third quarters of 2019 and 2018, respectively.



Segment income of the closures business for the third quarter of 2019 decreased $2.5 million as compared to the same period in 2018, and segment income margin decreased to 12.7 percent from 13.1 percent over the same periods.  The decrease in segment income was primarily due to a less favorable mix of products sold and lower pension income, partially offset by the favorable impact from the lagged pass through to customers of lower resin costs in the current year period as compared to an unfavorable impact from higher resin costs in the prior year period.

Segment income of the plastic container business for the third quarter of 2019 increased $2.9 million as compared to the same period in 2018, and segment income margin increased to 7.8 percent from 5.7 percent over the same periods.  The increase in segment income was primarily attributable to higher volumes, strong operating performance and the prior year unfavorable impact of costs associated with the start-up of the new manufacturing facility in Fort Smith, Arkansas, partially offset by lower pension income and a less favorable mix of products sold.

Interest and Other Debt Expense. Interest and other debt expense before loss on early extinguishment of debt for the third quarter of 2019 decreased $1.4 million to $26.8 million as compared to $28.2 million in the same period in 2018 primarily due to lower average outstanding borrowings as a result of the repayment of debt at the end of 2018 and lower weighted average interest rates due in part to the redemption on August 1, 2019 of all outstanding 5½% Notes. Loss on early extinguishment of debt of $1.7 million in the third quarter of 2019 was the result of the redemption of all outstanding 5½% Notes.

Provision for Income Taxes. The effective tax rates were 22.0 percent and 23.1 percent for the third quarters of 2019 and 2018, respectively.

Nine Months Ended September 30, 2019 Compared with Nine Months Ended September 30, 2018

Overview.  Consolidated net sales were $3.44 billion in the first nine months of 2019, a 1.9 percent increase as compared to the first nine months of 2018 primarily as a result of the pass through of higher raw material and other manufacturing costs in the metal container business and higher volumes in the metal and plastic container businesses, partially offset by the impact of unfavorable foreign currency translation, a less favorable mix of products sold and slightly lower unit volumes in the closures business. Income before interest and income taxes for the first nine months of 2019 decreased by $46.8 million as compared to the same period in 2018 primarily due to $47.1 million of higher rationalization charges incurred principally in connection with the previously announced footprint optimization plan for the metal container business and the resulting withdrawal from the Central States Pension Plan, lower pension income, a less favorable mix of products sold, the impact of unfavorable foreign currency translation and slightly lower unit volumes in the closures business. These decreases were partially offset by strong operating performance in all businesses, the favorable impact from the lagged pass through of lower resin costs in the closures business as compared to an unfavorable impact from higher resin costs in the prior year period, higher volumes in the metal and plastic container businesses and the prior year unfavorable impact of costs associated with the start-up of two new manufacturing facilities. Results for the first nine months of 2019 and 2018 included rationalization charges of $48.6 million and $1.5 million, respectively, other pension and postretirement income of $13.3 million and $27.5 million, respectively, and loss on early extinguishment of debt of $1.7 million and $2.5 million, respectively. Net income for the first nine months of 2019 was $159.0 million as compared to $185.8 million for the same period in 2018.  Net income per diluted share for the first nine months of 2019 was $1.43 as compared to $1.66 for the same period in 2018.

Net Sales.  The $63.2 million increase in consolidated net sales in the first nine months of 2019 as compared to the first nine months of 2018 was the result of higher net sales in the metal and plastic container businesses, partially offset by lower net sales in the closures business.

Net sales for the metal container business increased $96.3 million, or 5.3 percent, in the first nine months of 2019 as compared to the same period in 2018.  This increase was primarily the result of the pass through of higher raw material and other manufacturing costs and a more favorable mix of products sold, partially offset by lowerhigher unit volumes of approximately six percent and the impact of unfavorable foreign currency translation of approximately $1.0 million. The volume decline was primarily the result of the continued impact from inventory adjustments at a seasonal customer, a customer plant shutdown in the fruit market and the competitive loss of a smaller, lower margin customer as well as a decline in soup volume.

Net sales for the closures business increased $3.5 million, or 1.0 percent, in the third quarter of 2018 as compared to the same period in 2017.  This increase was primarily the result of the pass through of higher raw material costs, partially offset by the impact of unfavorable foreign currency translation of approximately $1.0 million.

Net sales for the plastic container business increased $11.2 million, or 8.2 percent, in the third quarter of 2018 as compared to the same period in 2017. This increase was principally due to the pass through of higher raw material costs and higher volumes of approximately threeone percent, partially offset by the impact of unfavorable foreign currency translation of approximately $1.0 million.$14 million and a less favorable mix of products sold. The increase in unit volumes was primarily the result of continued growth in pet food volumes as well as higher volumes for a seasonal customer that had been destocking inventory in the prior year period, partially offset by the unfavorable impact from customers who bought ahead of 2019 steel inflation in the fourth quarter of 2018 and lower U.S. fruit and vegetable pack volumes.


Gross Profit.  Gross profit marginNet sales for the closures business decreased 0.6 percentage points to 15.6$36.9 million, or 3.3 percent, in the third quarterfirst nine months of 20182019 as compared to the same period in 20172018.  This decrease was primarily the result of the impact of unfavorable foreign currency translation of approximately $29 million, a less favorable mix of products sold and lower unit volumes of approximately one percent.
Net sales for the plastic container business increased $3.8 million, or 0.8 percent, in the first nine months of 2019 as compared to the same period in 2018. This increase was primarily due to higher volumes of approximately two percent and the pass through


of higher raw material costs, partially offset by a less favorable mix of products sold and the impact of unfavorable foreign currency translation of approximately $3 million.

Gross Profit.  Gross profit margin increased 0.3 percentage points to 16.2 percent in the first nine months of 2019 as compared to the same period in 2018 for the reasons discussed below in "Income before Interest and Income Taxes".Taxes."


Selling, General and Administrative Expenses.  Selling, general and administrative expenses as a percentage of consolidated net sales decreased 0.3 percentage points to 5.6remained constant at 6.8 percent for the third quarterfirst nine months of 20182019 as compared to 5.9 percent for the same period in 2017.2018. Selling, general and administrative expenses decreased $1.4increased $5.1 million to $73.7$233.8 million for the third quarterfirst nine months of 20182019 as compared to $75.1$228.7 million for the same period in 2017.2018.


Income before Interest and Income Taxes.  Income before interest and income taxes for the third quarterfirst nine months of 2018 was $138.52019 decreased by $46.8 million as compared to $138.6 million in the third quarterfirst nine months of 2017,2018, and marginmargins decreased to 10.68.4 percent from 10.99.9 percent over the same periods. Higher segmentThe decrease in income inbefore interest and income taxes was primarily the closures and plastic container businesses was offset by lower segment income in the metal container business. Margin decreased largely due to the mathematical impact on marginresult of higher sales as a resultrationalization charges. Rationalization charges were $48.6 million and $1.5 million for the first nine months of the contractual pass through of significantly higher raw material costs.2019 and 2018, respectively.


Segment income of the metal container business for the third quarterfirst nine months of 20182019 decreased $5.3$38.2 million or 5.7 percent, as compared to the same period in 2017,2018, and segment income margin decreased to 10.97.0 percent from 11.99.5 percent over the same periods.  The decrease in segment income and segment income margin was primarily attributable to $41.5 million of higher rationalization charges, lower pension income and a less favorable mix of products sold, partially offset by production efficiencies in the U.S. due in part to the favorable impact from a larger amount of finished goods inventory produced in the current year period and higher unit volumes. Rationalization charges were $42.3 million and $0.8 million in the first nine months of 2019 and 2018, respectively. Rationalization charges in the first nine months of 2019 were principally related to the previously announced footprint optimization plan and the resulting withdrawal from the Central States Pension Plan.

Segment income of the closures business for the first nine months of 2019 decreased $11.4 million as compared to the same period in 2018, and segment income margin decreased to 12.3 percent from 12.9 percent over the same periods.  The decrease in segment income was primarily attributabledue to rationalization charges of $6.0 million principally related to the previously announced shutdown of a metal closures manufacturing facility in Spain, lower pension income, a less favorable mix of products sold, the impact of unfavorable foreign currency translation and slightly lower unit volumes, and higher freight expense, partially offset by strong operating performance and the contractualfavorable impact from the lagged pass through to customers of indexed inflationlower resin costs in the current year period as compared to the unfavorable impact in the prior year period from the contractual pass through of indexed deflation, a more favorable mix of products sold and foreign currency transaction losseshigher resin costs in the prior year period. The decline in segment income margin was primarily due to the mathematical impact on margin of higher sales as a result of the contractual pass through of significantly higher raw material costs.




Segment income of the closures business for the third quarter of 2018 increased $2.0 million, or 4.4 percent, as compared to the same period in 2017, and segment income margin increased to 13.1 percent from 12.7 percent over the same periods.  The increase in segment income was principally a result of lower costs primarily due to synergies realized from the SDS acquisition and a more favorable mix of products sold, partially offset by the unfavorable impact from the lagged pass through to customers of higher resin costs.


Segment income of the plastic container business for the third quarterfirst nine months of 20182019 increased $2.0$4.2 million or 30.8 percent, as compared to the same period in 2017,2018, and segment income margin increased to 5.78.0 percent from 4.77.1 percent over the same periods.  The increase in segment income was primarily attributable to higher volumes, and lower manufacturing costs partially offset byand the prior year unfavorable impact from the lagged pass through to customers of higher resin costs and costs associated with the start-up of the new manufacturing facility in Fort Smith, Arkansas.Arkansas, partially offset by lower pension income and a less favorable mix of products sold.


Interest and Other Debt Expense. Interest and other debt expense for the third quarter of 2018 decreased $2.4 million to $28.2 million as compared to $30.6 million in the same period in 2017 primarily due to lower weighted average outstanding borrowings largely as a result of the partial repayment of acquisition borrowings under the Credit Agreement at the end of 2017.

Provision for Income Taxes. The effective tax rates were 23.1 percent and 33.0 percent for the third quarters of 2018 and 2017, respectively. The effective tax rate in the third quarter of 2018 benefitted primarily from the 2017 Tax Act and the settlement of a state tax audit in the current year period.

Nine Months Ended September 30, 2018 Compared with Nine Months Ended September 30, 2017

Overview.  Consolidated net sales were $3.38 billion in the first nine months of 2018, representing a 9.2 percent increase as compared to the first nine months of 2017 primarily as a result of the pass through of higher raw material costs across all businesses, the acquisition of SDS in April 2017, the impact of favorable foreign currency translation and higher volumes in the plastic container business, partially offset by lower unit volumes in the metal container business and legacy closures operations. Income before interest and income taxes for the first nine months of 2018 increased by $64.2 million, or 23.7 percent, as compared to the same period in 2017 primarily as a result of the inclusion in the prior year period of acquisition related costs of $23.8 million, the benefit from the inclusion of a full year of operations of SDS, the unfavorable impact in the prior year period from the write-up of inventory of SDS for purchase accounting, lower manufacturing costs in each of our businesses, higher volumes in the plastic container business, the contractual pass through to customers in the metal container business of indexed inflation in the current year period as compared to the unfavorable impact in the prior year period from the contractual pass through of indexed deflation, 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 and foreign currency transaction losses in the prior year period. These increases were partially offset by the impact from lower unit volumes in the metal container business and legacy closures operations, higher freight expense, the unfavorable impact from the lagged pass through of higher resin costs in the closures and plastic container businesses and costs associated with the start-up of two new manufacturing facilities. Results for the first nine months of 2018 and 2017 included rationalization charges of $1.5 million and $4.5 million, respectively, and loss on early extinguishment of debt of $2.5 million and $7.1 million, respectively. Results for the first nine months of 2018 and 2017 also included other pension and postretirement income of $27.5 million and $25.2 million, respectively. Net income for the first nine months of 2018 was $185.8 million as compared to $123.5 million for the same period in 2017.  Net income per diluted share for the first nine months of 2018 was $1.66 as compared to $1.11 for the same period in 2017.

Net Sales.  The $284.3 million increase in consolidated net sales in the first nine months of 2018 as compared to the first nine months of 2017 was the result of higher net sales in each of our businesses.

Net sales for the metal container business increased $40.3 million, or 2.3 percent, in the first nine months of 2018 as compared to the same period in 2017.  This increase was primarily the result of the pass through of higher raw material and other manufacturing costs and the impact of favorable foreign currency translation of approximately $14.0 million, partially offset by lower unit volumes of approximately six percent. The decrease in unit volumes was primarily the result of a seasonal customer adjusting its inventory levels, a customer plant shutdown in the fruit market, the competitive loss of a smaller, lower margin customer, lower unit volumes with certain customers who bought ahead in the fourth quarter of 2017 as well as a decline in soup volume.

Net sales for the closures business increased $205.8 million, or 22.8 percent, in the first nine months of 2018 as compared to the same period in 2017.  This increase was primarily the result of the acquisition of SDS, the impact of favorable foreign currency translation of approximately $22.0 million and the pass through of higher raw material costs, partially offset by lower unit volumes of approximately three percent in the legacy closures operations due primarily to a less favorable fruit and vegetable pack in Europe as a result of weather conditions.




Net sales for the plastic container business increased $38.2 million, or 9.1 percent, in the first nine months of 2018 as compared to the same period in 2017. This increase was primarily due to the pass through of higher raw material costs, higher volumes of approximately four percent and the impact of favorable foreign currency translation of approximately $1.0 million.

Gross Profit.  Gross profit margin increased 0.3 percentage points to 15.9 percent in the first nine months of 2018 as compared to the same period in 2017 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 0.7 percentage points to 6.8 percent for the first nine months of 2018 as compared to 7.5 percent for the same period in 2017. Selling, general and administrative expenses decreased $3.8 million to $228.7 million for the first nine months of 2018 as compared to $232.5 million for the same period in 2017. These decreases were primarily due to the inclusion in the prior year period of $23.8 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, 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 nine months of 2018 increased by $64.2 million, or 23.7 percent, as compared to the first nine months of 2017, and margin increased to 9.9 percent from 8.7 percent over the same periods. The increase in income before interest and income taxes was primarily the result of higher segment income in the closures and plastic container businesses as well as the inclusion in the prior year period of acquisition related costs of $23.8 million, partially offset by a decrease in segment income in the metal container business. The increase in margin was primarily attributable to the inclusion in the prior year period of acquisition related costs and an increase in segment income margin in the closures and plastic container businesses, partially offset by a decline in segment income margin in the metal container business.

Segment income of the metal container business for the first nine months of 2018 decreased $13.2 million, or 7.1 percent, as compared to the same period in 2017, and segment income margin decreased to 9.5 percent from 10.5 percent over the same periods.  The decrease in segment income was primarily attributable to lower unit volumes and higher freight expense, partially offset by the contractual pass through to customers of indexed inflation in the current year period as compared to the unfavorable impact in the prior year period from the contractual pass through of indexed deflation, 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. The decline in segment income margin was due primarily to the mathematical impact on margin of higher sales as a result of the contractual pass through of significantly higher raw material costs. Rationalization charges were $0.8 million and $3.3 million in the first nine months of 2018 and 2017, respectively.

Segment income of the closures business for the first nine months of 2018 increased $40.3 million, or 39.1 percent, as compared to the same period in 2017, and segment income margin increased to 12.9 percent from 11.4 percent over the same periods.  The increase in segment income was primarily due to the inclusion of segment income from the SDS operations for the full period in 2018, the unfavorable impact in the prior year period of a charge of $11.9 million for the write-up of inventory of SDS for purchase accounting, lower manufacturing costs and foreign currency transaction losses in the prior year period, partially offset by lower unit volumes in the legacy closures operations and the unfavorable impact from the lagged pass through of lower resin costs.

Segment income of the plastic container business for the first nine months of 2018 increased $12.7 million, or 63.5 percent, as compared to the same period in 2017, and segment income margin increased to 7.1 percent from 4.7 percent over the same periods.  The increase in segment income was primarily attributable to higher volumes and lower manufacturing costs, partially offset by the unfavorable impact from the lagged pass through of lower resin costs and costs associated with the start-up of the new manufacturing facility in Fort Smith, Arkansas.

Interest and Other Debt Expense. Interest and other debt expense before loss on early extinguishment of debt for the first nine months of 2018 increased $8.42019 decreased $6.3 million to $88.6$82.3 million as compared to $80.2$88.6 million in the same period in 20172018 primarily due to higherlower average outstanding borrowings principally asborrowings. Loss on early extinguishment of debt of $1.7 million in the first nine months of 2019 was a result of borrowings for the acquisitionredemption of SDS and higher weighted average interest rates.all outstanding 5½% Notes in August 2019. Loss on early extinguishment of debt of $2.5 million in the first nine months of 2018 was primarily a result of the redemption in April 2018 of all remaining outstanding 5% Senior Notes in April 2018due 2020 and the completion of the First Amendmentan amendment to the Credit Agreement in May 2018. Loss on early extinguishment of debt of $7.1 million in the first nine 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 23.822.1 percent and 32.623.8 percent for the first nine months of 20182019 and 2017,2018, respectively. The effective tax rate in the first nine months of 2018 benefited2019 benefitted from an audit period expiration, the 2017 Tax Act.resolution of a prior year tax audit and the timing of certain tax deductions.







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% 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 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.

As a result of thethis 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$1.7 million during the secondthird quarter of 2018.

You should also read Note 7 to our Condensed Consolidated Financial Statements2019 for the three andwrite-off of unamortized debt issuance costs.

For the nine months ended September 30, 2018 included elsewhere2019, we used net borrowings of revolving loans of $674.6 million to fund repayments of long-term debt of $308.2 million, decreases in this Quarterly Report.outstanding checks of $83.7 million, cash used in operations of $2.4 million, net capital expenditures and other investing activities of $166.3 million, dividends paid on our common stock of $38.6 million and repurchases of our common stock of $27.4 million and to increase cash and cash equivalents (including the negative effect of exchange rate changes of $3.4 million) by $44.6 million.


For the nine months ended September 30, 2018, we used net borrowings of revolving loans of $657.2 million and cash provided by operations of $13.1 million to fund repayments of long-term debt of $286.2 million, decreases in outstanding checks of $87.8 million, net capital expenditures and other investing activities of $134.4 million, dividends paid on our common stock of $33.8 million, repurchases of our common stock of $3.1 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 $4.3 million) by $117.8 million.

For the nine months ended September 30, 2017, we used aggregate proceeds of $1,789.2 million from the issuance of the 4¾% Notes, the 3¼% Notes and term loan borrowings under our Credit Agreement and net borrowings of revolving loans of $427.2 million to fund the acquisition of SDS for $1,028.7 million, repayments of long-term debt of $755.0 million, cash used in operations of $4.5 million, net capital expenditures of $123.7 million, decreases in outstanding checks of $78.9 million, dividends paid on our common stock of $30.4 million, debt issuance costs of $16.6 million and repurchases of our common stock of $4.1 million and to increase cash and cash equivalents by $174.5 million.


At September 30, 2018,2019, we had $698.0$766.0 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 September 30, 20182019 was $472.5$407.3 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 20182019 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 $40.7 million in the first nine months of 2019, largely 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 not expected to be significant. 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, beginning in 2020. 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 $1.8$3.8 million and $2.8$1.8 million for the nine months ended September


30, 2019 and 2018, respectively. Exclusive of the footprint optimization plan for our metal container business and 2017, respectively. Additional cash spending underwithdrawal from the Central States Pension Plan discussed above, remaining expenses for our rationalization plans of $2.8$2.4 million isare expected primarily through 2019 and remaining cash expenditures for our rationalization plans of $5.0 million are expected through 2023.
You should also read Note 4 to our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 20182019 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. We will adopt this amendment on January 1, 2019. In adopting this amendment, we expect to elect the transition method which will allow us to recognize the effects of applying this amendment as a cumulative effect to retained earnings as of January 1, 2019 and not restate comparative periods for the effects of this amendment. 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 nine months ended September 30, 20182019 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. 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 2.  Unregistered Sales of Equity Securities and Use of Proceeds

(c) Purchases of Equity Securities By the Issuer and Affiliated Purchasers

The following table provides information about shares of our common stock that we repurchased during the third quarter of 2019:

ISSUER PURCHASES OF EQUITY SECURITIES
        
        
     
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
(d)
Approximate
Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(in millions) (1)
 
(a)
Total Number of Shares Purchased
    
  
(b)
Average Price Paid per Share
  
    
    
July 1-31, 2019   $124.6
August 1-31, 2019205,134 $29.58 205,134 $118.5
September 1-30, 2019202,406 $29.82 202,406 $112.5
        
Total407,540 $29.70 407,540 $112.5



(1) 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. Prior to the third quarter of 2019, we had repurchased approximately $175.4 million of our common stock pursuant to such authorization.



Item 6.  Exhibits




Exhibit Number Description
   
31.1 
   
31.2 
   
32.1 
   
32.2 
   
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: November 8, 20182019 /s/ Robert B. Lewis                  
 Robert B. Lewis
 Executive Vice President and
 Chief Financial Officer
 (Principal Financial and
 Accounting Officer)


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