SILGAN HOLDINGS INC (SLGN)

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, 2025 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 and supplier of sustainable rigid packaging solutions for the world's essential consumer goods products.  We currently produce dispensing and specialty closures for the fragrance and beauty, food, beverage, personal and health care, home care and lawn and garden markets; steel and aluminum containers for pet and human food and general line products; and custom designed plastic containers for the pet and human food, consumer health and pharmaceutical, personal care, home care, lawn and garden and automotive markets. We are a leading worldwide manufacturer of dispensing and specialty closures, a leading manufacturer of metal containers in North America and Europe, and a leading manufacturer of custom containers in North America for a variety of 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.

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RESULTS OF OPERATIONS

The following table sets forth certain unaudited income statement data expressed as a percentage of net sales for the periods presented:

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

Net Sales.  In the second quarter of 2026, consolidated net sales were $1.6 billion, an increase of $104.1 million, or 6.8 percent, as compared to the second quarter of 2025 primarily due to the contractual pass through of higher raw material and other manufacturing costs, the impact from favorable foreign currency translation of approximately $16.0 million and a more favorable mix of products sold in the custom containers segment, partially offset by a less favorable mix of products sold in the dispensing and specialty closures and metal containers segments and lower volumes in the dispensing and specialty closures and custom containers segments.

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In the first six months of 2026, consolidated net sales were $3.2 billion, an increase of $198.7 million, or 6.6 percent, as compared to the first six months of 2025 primarily due to the contractual pass through of higher raw material and other manufacturing costs, the impact from favorable foreign currency translation of approximately $62.0 million, higher unit volumes in the metal containers segment and a more favorable mix of products sold in the custom containers segment, partially offset by a less favorable mix of products sold in the dispensing and specialty closures and metal containers segments and lower volumes in the dispensing and specialty closures and custom containers segments.

Gross Profit.  Gross profit margin decreased 1.5 percentage points to 17.9 percent in the second quarter of 2026 as compared to the same period in 2025 and decreased 1.4 percentage points to 17.5 percent in the first six months of 2026 as compared to the same periods in 2025 primarily for the reasons discussed below in "Income before Interest and Income Taxes".

Selling, General and Administrative Expenses.  In the second quarter of 2026, selling, general and administrative expenses as a percentage of consolidated net sales decreased to 7.7 percent as compared to 7.9 percent in the second quarter of 2025. For the second quarter of 2026, selling, general and administrative expenses increased $5.0 million to $126.8 million as compared to the second quarter of 2025. In the first six months of 2026, selling, general and administrative expenses as a percentage of consolidated net sales decreased to 8.1 percent as compared to 8.3 percent in the first six months of 2025. In the first six months of 2026, selling, general and administrative expenses increased $7.1 million to $258.0 million as compared to the first six months of 2025. The increase in selling, general and administrative expenses for each of the second quarter and the first six months of 2026 was primarily due to the impact of higher foreign currency exchange rates and higher expenses for corporate development activities.

Income before Interest and Income Taxes.  In the second quarter of 2026, income before interest and income taxes decreased by $16.5 million to $151.0 million as compared to $167.5 million in the second quarter of 2025, and margins decreased to 9.2 percent from 10.9 percent over the same periods. The decrease in income before interest and income taxes was primarily the result of a less favorable mix of products sold in the dispensing and specialty closures and metal containers segments, higher rationalization charges, higher expenses for corporate development activities and lower volumes in the dispensing and specialty closures and custom containers segments, partially offset by the favorable impact of foreign currency and a more favorable mix of products sold in the custom containers segment. Rationalization charges were $18.2 million and $9.9 million in the second quarters of 2026 and 2025, respectively.

In the first six months of 2026, income before interest and income taxes decreased by $20.5 million to $277.6 million as compared to $298.1 million in the first six months of 2025, and margins decreased to 8.7 percent from 9.9 percent over the same periods. The decrease in income before interest and income taxes was primarily the result of a less favorable mix of products sold in the dispensing and specialty closures and metal containers segments, lower volumes in the dispensing and specialty closures and custom containers segments, higher rationalization charges, higher expenses for corporate development activities, and the benefit in the prior year period from the sell through of lower cost inventory and the adverse impact in the current year period from the sell through of higher cost inventory in our European metal closures operations, partially offset by the favorable impact of foreign currency, higher unit volumes in the metal containers segment and a more favorable mix of products sold in the custom containers segment. Rationalization charges were $27.2 million and $20.8 million in the first six month of 2026 and 2025, respectively.

Interest and Other Debt Expense. In the second quarter of 2026, interest and other debt expense decreased $1.6 million to $47.1 million as compared to $48.7 million in the second quarter of 2025. In the first six months of 2026, interest and other debt expense before the loss on early extinguishment of debt decreased $3.1 million to $88.5 million as compared to $91.6 million in the first six months of 2025. The decrease in the second quarter of 2026 was primarily due to lower average outstanding debt borrowings in the current year period as compared to the prior year period. The decrease in the first six months of 2026 was primarily due to lower weighted average interest rates during the current year period as compared to the prior year period.

Provision for Income Taxes. For the second quarters of 2026 and 2025, the effective tax rates were 28.1 percent and 25.6 percent, respectively. For the first six months of 2026 and 2025, the effective tax rates were 27.4 percent and 24.8 percent, respectively. The increase in the effective tax rates in the second quarter and first six months of 2026 was primarily due to changes in the geographic mix of profit in the current year periods as compared to the prior year periods.

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Non-GAAP Measures

Generally accepted accounting principles in the United States are commonly referred to as GAAP. A non-GAAP financial measure is generally defined as a financial measure that purports to measure financial performance, financial position or liquidity but excludes or includes amounts that could not be so adjusted in the most comparable GAAP measure. Adjusted EBIT and adjusted EBIT margin are unaudited supplemental measures of financial performance that the Company uses, which are not required by, or presented in accordance with, GAAP and therefore are non-GAAP financial measures. These non-GAAP financial measures should not be considered as alternatives to income befor

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis is intended to assist you in understanding our consolidated financial condition and results of operations for the three-year period ended December 31, 2025. Our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report contain detailed information that you should refer to in conjunction with the following discussion and analysis.

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GENERAL

We are a leading manufacturer and supplier of sustainable rigid packaging solutions for the world's essential consumer goods products. We currently produce dispensing and specialty closures for the fragrance and beauty, food, beverage, personal and health care, home care and lawn and garden markets; steel and aluminum containers for pet and human food and general line products; and custom designed plastic containers for the pet and human food, consumer health and pharmaceutical, personal care, home care, lawn and garden and automotive markets. We are a leading worldwide manufacturer of dispensing and specialty closures, a leading manufacturer of metal containers in North America and Europe, the largest manufacturer of metal food containers in North America with a unit volume market share in the United States for the year ended December 31, 2025 of more than half of the market, and a leading manufacturer of custom containers in North America for a variety of markets.

Our objective is to increase shareholder value by efficiently deploying capital and management resources to grow our business through acquisitions and organically, reduce operating costs, build sustainable competitive positions, or franchises. We have grown our net sales and income from operations largely through acquisitions but also through organic growth, and we continue to evaluate acquisition opportunities in the consumer goods packaging market.

SALES GROWTH

We have increased net sales and market share in our dispensing and specialty closures, metal containers, and custom containers businesses through both acquisitions and organic growth. As a result, we have expanded and diversified our customer base, geographic presence and product lines.

We are a leading worldwide manufacturer of dispensing systems and specialty closures for fragrance and beauty, food, beverage, personal and health care, home care and lawn and garden products. Since 2003, following our acquisition of the White Cap closures operations in the United States, net sales of our dispensing and specialty closures business have increased to $2.7 billion in 2025 as a result of both acquisitions and organic growth, representing a compound annual growth rate of approximately 12.4 percent over that period. We intend to pursue further acquisition opportunities in the dispensing and specialty closures markets, including in dispensing systems, such as our acquisition of Weener Packaging in October 2024. Additionally, we expect to continue to generate organic growth in our dispensing and specialty closures business, particularly in dispensing systems. In 2025, net sales for our dispensing and specialty closures business increased approximately 17.5 percent as compared to 2024 primarily as a result of the inclusion of net sales of Weener Packaging and higher organic unit volumes for high value dispensing products. Volume growth in dispensing products was offset by lower volumes for specialty closures for the North American beverage markets, primarily due to adverse weather that impacted consumption patterns in the first half of 2025. For 2026, we expect higher volumes in our dispensing and specialty closures business as compared to 2025, with continued growth in dispensing products.

We are a leading manufacturer and supplier of metal containers in North America and Europe, primarily as a result of our acquisitions but also as a result of growth with existing customers. During the past 37 years, the metal food container market in North America has experienced significant consolidation primarily due to the desire by food processors to reduce costs and focus resources on their core operations rather than self-manufacture their metal food containers. Our acquisitions of the metal food container manufacturing operations of Nestlé, Dial, Del Monte, Birds Eye, Campbell, Pacific Coast Producers and Purina Steel Can reflect this trend. We estimate that approximately seven percent of the market for metal food containers in the United States is still served by self-manufacturers. Despite a relatively flat market, we increased our share of the market for metal food containers in the United States primarily through acquisitions and growth with existing customers, particularly in the growing pet food market. Since 1987, net sales of our metal containers business have increased to $3.1 billion, representing a compound annual growth rate of approximately 6.8 percent. We also enhanced our business by focusing on providing customers with high levels of quality and service, a more sustainable solution for their packaging needs and value-added features such as our Quick Top® easy-open ends, shaped metal food containers and alternative color offerings for metal food containers. In 2025, net sales for our metal containers business increased by approximately 8.2 percent as compared to 2024 primarily as a result of the contractual pass through of higher raw material and other manufacturing costs and higher unit volumes. For 2026, we expect that volumes for our metal containers business will improve over 2025, primarily driven by growth in pet food products.

We have improved the market position of our custom containers business since 1987, with net sales increasing to $637.6 million in 2025, representing a compound annual growth rate of approximately 5.3 percent over that period. We achieved this improved market position primarily through strategic acquisitions as well as through organic growth. The custom container market of the consumer goods packaging industry continues to be highly

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fragmented. We have focused on the segment of this market where custom design and decoration allows customers to differentiate their products such as in personal care. We may pursue further acquisition opportunities in markets where we believe that we can successfully apply our acquisition and value-added operating expertise and strategy. In 2025, net sales in our custom containers business decreased approximately 1.8 percent as compared to 2024 primarily due to lower volumes largely due to the exit of lower margin business as a result of footprint optimization plans to achieve our previously announced cost reduction initiative. For 2026, we expect volumes for our custom containers business will be comparable to 2025 levels.

OPERATING PERFORMANCE

We have improved the operating performance of our plant facilities through the investment of capital for productivity improvements, manufacturing efficiencies, manufacturing cost reductions and the optimization of our manufacturing facilities footprints. Our acquisitions and investments have enabled us to rationalize plant operations and decrease overhead costs through plant closings and downsizings and to realize manufacturing efficiencies as a result of optimizing production scheduling. In late 2023, we announced a comprehensive cost reduction initiative to achieve $50 million of cost savings over the following two years from footprint rationalizations and other cost reduction actions in all of our businesses. As part of this initiative, we closed three dispensing and specialty closures manufacturing facilities, two metal container manufacturing facilities and two custom container manufacturing facilities, relocating volumes from such facilities to other facilities. In addition, as part of this initiative we optimized production at several other manufacturing facilities across our network. We completed this initiative and realized approximately $20 million of cost savings in 2024 and approximately $30 million of additional cost savings in 2025. Additionally, apart from this initiative, in late 2025 we announced optimization plans for our metal closure operations in Europe primarily to reduce costs, which include the planned closing of one manufacturing facility.

Historically, we have been successful in renewing our multi-year supply arrangements with our customers. We estimate that in 2026 approximately 90 percent of our projected metal containers sales and a majority of our projected dispensing and specialty closures and custom containers sales will be under multi-year arrangements.

Many of our multi-year customer supply arrangements generally provide for the pass through of changes in raw material, labor and other manufacturing costs, thereby significantly reducing the exposure of our results of operations to the volatility of these costs. Our metal closures and metal containers supply agreements with our customers provide for the pass through of changes in our metal costs. For our metal closures and metal containers customers without long-term contracts, we have also generally increased prices to pass through increases in our metal costs. Our dispensing systems, plastic closures and plastic containers supply agreements with our customers provide for the pass through of changes in our resin costs, subject in many cases to a lag in the timing of such pass through. For our dispensing systems, plastic closures and plastic containers customers without long-term contracts, we have also generally increased prices to pass through increases in our resin costs.

Our metal containers business is dependent, in part, upon the vegetable and fruit harvests in the midwest and western regions of the United States and, to a lesser extent, in a variety of national growing regions in Europe. Our dispensing and specialty closures business is also dependent, in part, upon vegetable and fruit 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 income from operations during that quarter. Additionally, as is common in the packaging industry, we provide extended payment terms to some of our customers in our metal containers business due to the seasonality of the vegetable and fruit packing process.

USE OF CAPITAL

Historically, we have used leverage to support our growth and increase shareholder returns. Our stable and predictable cash flow, generated largely as a result of our long-term customer relationships and generally recession resistant business, supports our financial strategy. We intend to continue using reasonable leverage, supported by our stable cash flows, to make value enhancing acquisitions. In determining reasonable leverage, we evaluate our cost of capital and manage our level of debt to maintain an optimal cost of capital based on current market conditions. If acquisition opportunities are not identified over a long 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. In October 2024, we funded the purchase price for Weener Packaging with €868.0 million of term and revolving loan borrowings under our Credit Agreement, including a €700.0 million incremental term loan, and cash on hand. In November 2024, we amended our Credit Agreement to extend maturity dates to November 2029 for

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revolving loans and November 2030 for term loans, to refinance term and revolving loan borrowings which were used to fund the purchase price for Weener Packaging with a new €900.0 million term loan and to provide us with additional flexibility

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