10-K 1 slgn-2015x1231x10k.htm 10-K 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 10-K
(Mark One)
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
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.
(Exact name of Registrant as specified in its charter)
Delaware
 
06-1269834
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
4 Landmark Square, Stamford, Connecticut
 
06901
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (203) 975-7110
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes  ý     No  o
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.     Yes  o     No  ý
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  ý     No  o
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  ý    No  o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ý
 
Accelerated filer  o
 
Non-accelerated filer o
 
Smaller reporting company o
 
 
 
 
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  o     No  ý
The aggregate market value of the Registrant’s Common Stock held by non-affiliates, computed by reference to the price at which the Registrant’s Common Stock was last sold as of June 30, 2015, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $2.136 billion. Common Stock of the Registrant held by executive officers and directors of the Registrant has been excluded from this computation in that such persons may be deemed to be affiliates. This determination of affiliate status is not a conclusive determination for other purposes.
As of February 1, 2016, the number of shares outstanding of the Registrant’s Common Stock, par value $0.01 per share, was 60,392,905.
Documents Incorporated by Reference:
Portions of the Registrant’s Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, for its Annual Meeting of Stockholders to be held in 2016 are incorporated by reference in Part III of this Annual Report on Form 10-K.



TABLE OF CONTENTS
 
 
 
Page
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 1B.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
Item 7.
 
 
 
Item 7A.
 
 
 
Item 8.
 
 
 
Item 9.
 
 
 
Item 9A.
 
 
 
Item 9B.
 
 
 
 
 
Item 10.
 
 
 
Item 11.
 
 
 
Item 12.
 
 
 
Item 13.
 
 
 
Item 14.
 
 
 
 
 
Item 15.
 

-i-


PART I
ITEM 1. BUSINESS.
GENERAL
We are a leading manufacturer of rigid packaging for shelf-stable food and other consumer goods products. We had consolidated net sales of approximately $3.8 billion in 2015. Our products are used for a wide variety of end markets and we operate 89 manufacturing plants in North America, Europe, Asia and South America. Our products include:
steel and aluminum containers for human and pet food and general line products;
metal, composite and plastic closures for food and beverage products; and
custom designed plastic containers and closures for personal care, food, health care, pharmaceutical, household and industrial chemical, pet care, agricultural, automotive and marine chemical products.
We are a leading manufacturer of metal containers in North America and Europe, and in North America we are the largest manufacturer of metal food containers with a unit volume market share in the United States in 2015 of slightly more than half of the market. Our leadership in these markets is driven by our high levels of quality, service and technological support, our low cost producer position, our strong long-term customer relationships and our proximity to customers through our widespread geographic presence. We have 47 metal container manufacturing facilities located in the United States, Europe and Asia, serving over 50 countries throughout the world. Additionally, we believe that we have the most comprehensive equipment capabilities in the industry. For 2015, our metal container business had net sales of $2.37 billion (approximately 62.8 percent of our consolidated net sales) and income from operations of $236.4 million (approximately 70.4 percent of our consolidated income from operations excluding corporate expense).
We are also a leading worldwide manufacturer of metal, composite and plastic closures for food and beverage products. Our leadership position in closures is a result of our ability to provide customers with high levels of quality, service and technological support. Our closures business provides customers with an extensive variety of proprietary metal, composite and plastic closures that ensure closure quality and safety, as well as state-of-the-art capping/sealing equipment and detection systems to complement our closures product offering. We have 19 closure manufacturing facilities located in North America, Europe, Asia and South America, from which we serve over 70 countries throughout the world. In addition, we license our technology to five other manufacturers for various markets we do not serve directly. For 2015, our closures business had net sales of $805.0 million (approximately 21.4 percent of our consolidated net sales) and income from operations of $91.8 million (approximately 27.3 percent of our consolidated income from operations excluding corporate expense).
Additionally, we are 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 success in the plastic packaging market is largely due to our demonstrated ability to provide our customers with high levels of quality, service and technological support, along with our value-added design-focused products and our extensive geographic presence with 23 manufacturing facilities in the United States and Canada. We produce plastic containers from a full range of resin materials and offer a comprehensive array of molding and decorating capabilities. For 2015, our plastic container business had net sales of $593.7 million (approximately 15.8 percent of our consolidated net sales) and income from operations of $7.8 million (approximately 2.3 percent of our consolidated income from operations excluding corporate expense).
Our customer base includes some of the world’s best-known branded consumer products companies. Our philosophy has been to develop long-term customer relationships by acting in partnership with our customers by providing reliable quality, service and technological support and utilizing our low cost producer position. The strength of our customer relationships is evidenced by our large number of multi-year supply arrangements, our high retention of customers’ business and our continued recognition from customers, as demonstrated by the many quality and service awards we have received. We estimate that in 2016 approximately 90 percent of our projected metal container sales in North America, a majority of our projected closures sales in the United States and a majority of our projected plastic container sales will be under multi-year customer supply arrangements.
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 believe that we will accomplish this goal because of

1


our leading market positions and management expertise in acquiring, financing, integrating and efficiently operating consumer goods packaging businesses.
OUR HISTORY
We are a Delaware corporation. We were founded in 1987 by our Non-Executive Co-Chairmen of the Board, R. Philip Silver and D. Greg Horrigan. Since our inception, we have acquired thirty-four businesses. As a result of the benefits of acquisitions and organic growth, we have become a leading manufacturer of metal containers in North America and Europe, with net sales of $2.37 billion in 2015, and have increased our overall share of the metal food container market in the United States from approximately 10 percent in 1987 to slightly more than half of the market in 2015. Through acquisitions, we have become a leading worldwide manufacturer of closures for food and beverage products, with net sales of $805.0 million in 2015. We have also grown our market position in the plastic container business since 1987, with net sales increasing sevenfold to $593.7 million in 2015. The following chart shows our acquisitions since our inception:
 
Acquired Business
 
Year
 
Products
Nestlé Food Company’s metal container manufacturing division
 
1987
 
Metal food containers
Monsanto Company’s plastic container business
 
1987
 
Plastic containers
Fort Madison Can Company of The Dial Corporation
 
1988
 
Metal food containers
Seaboard Carton Division of Nestlé Food Company
 
1988
 
Paperboard containers
Aim Packaging, Inc.
 
1989
 
Plastic containers
Fortune Plastics Inc.
 
1989
 
Plastic containers
Express Plastic Containers Limited
 
1989
 
Plastic containers
Amoco Container Company
 
1989
 
Plastic containers
Del Monte Corporation’s U.S. can manufacturing operations
 
1993
 
Metal food containers
Food Metal and Specialty business of American National Can Company
 
1995
 
Metal food containers and
metal closures
Finger Lakes Packaging Company, Inc., a subsidiary of Birds Eye Foods, Inc.
 
1996
 
Metal food containers
Alcoa Inc.’s North American aluminum roll-on closures business
 
1997
 
Aluminum roll-on closures
Rexam PLC’s North American plastic container business
 
1997
 
Plastic containers and closures
Winn Packaging Co.
 
1998
 
Plastic containers
Campbell Soup Company’s steel container manufacturing business
 
1998
 
Metal food containers
Clearplass Containers, Inc.
 
1998
 
Plastic containers
RXI Holdings, Inc.
 
2000
 
Plastic containers and plastic closures, caps, sifters and fitments
Thatcher Tubes LLC
 
2003
 
Plastic tubes
Amcor White Cap, LLC
 
2003
 
Metal, composite and plastic vacuum closures
Pacific Coast Producers’ can manufacturing operations
 
2003
 
Metal food containers
Amcor White Cap (Europe, Asia and South America)
 
2006 - 2008
 
Metal, composite and plastic vacuum closures
Cousins-Currie Limited
 
2006
 
Plastic containers
Grup Vemsa 1857, S.L.’s metal vacuum closures operations in Spain and China
 
2008
 
Metal vacuum closures

2


Acquired Business
 
Year
 
Products
IPEC Global, Inc. and its subsidiaries
 
2010
 
Plastic closures
Vogel & Noot Holding AG’s metal container operations
 
2011
 
Metal containers
DGS S.A.’s twist-off metal closures operations
 
2011
 
Metal vacuum closures
Nestlé Purina PetCare’s metal container manufacturing operations
 
2011
 
Metal containers
Öntaş Öner Teneke Ambalaj Sanayi
ve Ticaret A.S.
 
2012
 
Metal containers and metal vacuum closures
Rexam High Barrier Food Containers, Inc., Rexam PLC’s plastic food container operations
 
2012
 
Plastic food containers
Amcor Packaging (Australia) Pty Ltd's metal vacuum closures operations in Australia
 
2013
 
Metal vacuum closures
Portola Packaging, Inc. and its subsidiaries
 
2013
 
Plastic closures
Tecnocap S.p.A.'s and Tecnocap LLC's metal vacuum closures operations in the U.S.
 
2013
 
Metal vacuum closures
Van Can Company's metal container manufacturing assets
 
2014
 
Metal containers
Injected Plastics Co.'s plastic closures operations
 
2015
 
Plastic closures
In May 2015, we acquired the plastic closures operations of Injected Plastics Co., or IPC, and we combined these operations with our closures operations.
OUR STRATEGY
We intend to enhance our position as a leading manufacturer of consumer goods packaging products by continuing to aggressively pursue a strategy designed to achieve future growth and increase shareholder value by focusing on the following key elements:
SUPPLY “BEST VALUE” PACKAGING PRODUCTS WITH HIGH LEVELS OF QUALITY, SERVICE AND TECHNOLOGICAL SUPPORT
Since our inception, we have been, and intend to continue to be, devoted to consistently supplying our products with the combination of quality, price and service that our customers consider to be “best value.” In our metal container business, we focus on providing high quality and high levels of service and utilizing our low cost producer position. We have made and are continuing to make significant capital investments to offer our customers value-added features such as our family of Quick Top® easy-open ends for our metal food containers, shaped metal food containers and alternative color offerings for metal food containers. In addition, we have made and continue to make investments for our Can Vision 2020SM program, which investments are intended to enhance the competitive advantages of metal packaging for food. In our closures business, we emphasize high levels of quality, service and technological support. We believe our closures business is the premier innovative closures solutions provider to the food and beverage industry by offering customers an extensive variety of metal, composite and plastic closures, as well as proprietary equipment solutions such as cap feeders, cappers and detection systems to ensure high quality package safety. In our plastic container business, we provide high levels of quality and service and focus on value-added, custom designed plastic containers to meet changing product and packaging demands of our customers. We believe that we are one of the few plastic packaging businesses that can custom design, manufacture and decorate a wide variety of plastic containers, providing the customer with the ability to satisfy more of its plastic packaging needs through one supplier. We will continue to supply customized products that can be delivered quickly to our customers with superior levels of design, development and technological support.
MAINTAIN LOW COST PRODUCER POSITION
We will continue pursuing opportunities to strengthen our low cost position in our business by:
maintaining a flat, efficient organizational structure, resulting in low selling, general and administrative expenses as a percentage of consolidated net sales;
achieving and maintaining economies of scale;

3


prudently investing in new technologies to increase manufacturing and production efficiency;
rationalizing our existing plant structure; and
serving our customers from our strategically located plants.
Through our metal container facilities, we believe that we provide the most comprehensive manufacturing capabilities in the industry. Through our closures business, we manufacture an extensive variety of metal, composite and plastic closures for the food and beverage industry throughout the world utilizing state-of-the-art technology and equipment, and we provide our customers with state-of-the-art capping/sealing equipment and detection systems. Through our plastic container facilities, we have the capacity to manufacture customized products across the entire spectrum of resin materials, decorating techniques and molding processes required by our customers. We intend to leverage our manufacturing, design and engineering capabilities to continue to create cost-effective manufacturing systems that will drive our improvements in product quality, operating efficiency and customer support.
In 2015, we initiated optimization plans in each of our businesses, which plans were designed to reduce manufacturing and logistical costs and provide productivity improvements and manufacturing efficiencies, thereby resulting in a lower cost manufacturing network for our businesses and strengthening the competitive position of each of our businesses in their respective markets. The optimization plans include the construction of a new metal container manufacturing facility and two new plastic container manufacturing facilities in the United States, the relocation of various equipment lines to facilities where we can better serve our customers and the rationalization of several existing manufacturing facilities. Our closures business successfully completed the execution of its optimization plan in 2015. Our metal and plastic container businesses are continuing the implementation of their optimization plans, including construction of the new manufacturing facilities.
MAINTAIN AN OPTIMAL CAPITAL STRUCTURE TO SUPPORT GROWTH AND INCREASE SHAREHOLDER VALUE
Our financial strategy is to use reasonable 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 longer period of time, we may use our cash flow to repay debt, repurchase shares of our common stock or increase dividends to our shareholders or for other permitted purposes. In 2013, we used cash on hand, revolving loan borrowings under a previous senior secured credit facility, or our 2011 Credit Facility, and other foreign bank revolving loans to fund repurchases of our common stock for $267.6 million (which included $250.0 million of our common stock purchased pursuant to a "modified Dutch auction" tender offer completed in February 2013), the purchase price for our acquisitions of Portola Packaging, Inc. and its subsidiaries, or Portola, the metal vacuum closures operations in Australia of Amcor Limited, or Amcor Australia Metal Closures, and the U.S. metal vacuum closures operations of Tecnocap S.p.A. and Tecnocap LLC, or Tecnocap U.S. Metal Closures, and the repayment of $300.9 million of term loans under our 2011 Credit Facility. In addition, we issued $300 million of 5½% Senior Notes due 2022, or the 5½% Notes, in September 2013, the net proceeds of which were used to repay revolving loans under our 2011 Credit Facility. In January 2014, we refinanced our 2011 Credit Facility with our new senior secured credit facility, or our Credit Agreement. Our Credit Agreement refinanced all outstanding amounts under our 2011 Credit Facility and provides us with a $985.6 million multicurrency revolving loan facility and a Cdn $15.0 million revolving loan facility for working capital requirements and other strategic initiatives. In September 2014, we funded the purchase price for the metal container manufacturing assets of Van Can Company, or Van Can, with cash on hand. In 2015, we used cash on hand and revolving loan borrowings under our Credit Agreement to fund repurchases of our common stock for $170.1 million (which included $161.8 million of our common stock purchased pursuant to a "modified Dutch auction" tender offer completed in March 2015).
EXPAND THROUGH ACQUISITIONS AND INTERNAL GROWTH
We intend to continue to increase our market share in our current business lines and related business lines through acquisitions and internal growth. We use a disciplined approach to make acquisitions that generate attractive cash returns. As a result, we expect to continue to expand and diversify our customer base, geographic presence and product lines. This strategy has enabled us to increase our net sales and income from operations over the last ten years. For example, in September 2014, we acquired the metal container manufacturing assets of Van Can, which expanded and diversified the customer base, geographic presence and product lines of our metal container business in the United States.

4


We are a leading manufacturer 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 29 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 Food Company, or Nestlé, The Dial Corporation, or Dial, Del Monte Corporation, or Del Monte, Birds Eye Foods, Inc., or Birds Eye, Campbell Soup Company, or Campbell, Pacific Coast Producers, or Pacific Coast, and Nestlé Purina PetCare's steel container self-manufacturing assets, or Purina Steel Can, reflect this trend. We estimate that approximately six percent of the market for metal food containers in the United States is still served by self-manufacturers.
While we have expanded our metal container business and increased our market share of metal containers primarily through acquisitions and growth with existing customers, we have also made over the last several years, and are continuing to make, significant capital investments in our metal container business to enhance our business and offer our customers value-added features, such as our family of Quick Top® easy-open ends for metal food containers, shaped metal food containers and alternative color offerings for metal food containers. In 2015, approximately 60 percent of our metal food containers sold had an easy-open end. In addition, we have made and continue to make investments for our Can Vision 2020SM program, which investments are intended to enhance the competitive advantages of metal packaging for food. In 2015, we commenced construction of a new metal food container manufacturing facility in Burlington, Iowa to better optimize the logistical footprint of our metal container operations in North America, allowing us to further reduce costs of our metal container business. The construction of this facility is expected to be completed in the first half of 2016.
With our acquisitions of our closures operations in North America, Europe, Asia and South America, we established ourselves as a leading worldwide manufacturer of metal, composite and plastic closures for food and beverage products, with leadership positions in the North American and European markets. In 2013, we expanded the geographic scope, product offerings and scale of our closures business with the acquisitions of Portola, Amcor Australia Metal Closures and Tecnocap U.S. Metal Closures. We may pursue further consolidation opportunities in the closures markets in which we operate. Additionally, we expect to continue to generate internal growth in our closures business, particularly in plastic closures. In making investments to pursue internal growth, we use a disciplined approach to generate attractive cash returns.
We have grown our market position for our plastic container business since 1987, with net sales increasing sevenfold to $593.7 million in 2015. We achieved this improvement primarily through strategic acquisitions as well as through internal growth. In 2012, we completed the strategic acquisition of the plastic food container operations of Rexam PLC now operating under the name Silgan Plastic Food Containers, or PFC, broadening our product offerings for shelf-stable food products to include plastic thermoformed barrier and non-barrier bowls and trays. As part of the acquisition of Portola in 2013, we acquired three plastic container manufacturing facilities in Canada, further expanding the geographic scope and product offerings of our plastic container business. In 2015, we commenced construction of two new plastic container manufacturing facilities, including a near-site facility to a major customer and another facility to meet the growing needs of our customers and allow us to further reduce costs of our plastic container business. These new facilities are located in North East, Pennsylvania and Hazelwood, Missouri. The construction of these facilities is expected to be completed in the first half of 2016. The plastic containers segment of the consumer goods packaging industry continues to be highly fragmented, and we intend to pursue further consolidation opportunities in this market. Over the long term, we also expect to continue to generate internal growth in our plastic container business. As with acquisitions, we use a disciplined approach to pursue internal growth to generate attractive cash returns. Through a combination of these efforts, we intend to continue to expand our customer base in the markets that we serve, such as the personal care, food, health care, pharmaceutical, household and industrial chemical, pet care, agricultural, automotive and marine chemical markets.
ENHANCE PROFITABILITY THROUGH PRODUCTIVITY IMPROVEMENTS AND COST REDUCTIONS
We intend to continue to enhance profitability through investment of capital for productivity improvements, manufacturing efficiencies, manufacturing cost reductions, and the optimization of our manufacturing facilities footprints. The additional sales and production capacity provided through acquisitions have enabled us to rationalize plant operations and decrease overhead costs through plant closings and downsizings. From 2011, we have closed two metal container manufacturing facilities, two closure manufacturing facilities and five plastic container manufacturing facilities in connection with our continuing efforts to streamline our plant operations, reduce operating costs and better match supply with geographic demand. In addition, we have announced the shutdown of two metal container manufacturing facilities and two plastic container manufacturing facilities that we expect to close during 2016.

5


We expect that most future acquisitions will continue to enable us to realize manufacturing efficiencies as a result of optimizing production scheduling and other benefits from economies of scale and the elimination of redundant selling and administrative functions. In addition to the benefits realized through the integration of acquired businesses, we have improved and expect to continue to improve the operating performance of our plant facilities by investing capital for productivity improvements and manufacturing cost reductions. While we have made some of these investments in certain of our plants, more opportunities still exist throughout our system. We will continue to use a disciplined approach to identify these opportunities to generate attractive cash returns.
In 2015, we initiated optimization plans in each of our businesses that were designed to reduce manufacturing and logistical costs and provide productivity improvements and manufacturing efficiencies, thereby resulting in a lower cost manufacturing network for our businesses and strengthening the competitive position of each of our businesses in their respective markets.  The optimization plans include the construction of a new metal food container manufacturing facility and two new plastic container manufacturing facilities, the relocation of various equipment lines to facilities where we can better serve our customers and the rationalization of several existing manufacturing facilities.  The three new manufacturing facilities are strategically located to meet the unique needs of our customers. Our closures business successfully completed the execution of its optimization plan in 2015. Our metal and plastic container businesses are continuing the implementation of their optimization plans, including construction of the new manufacturing facilities.
BUSINESS SEGMENTS
We are a holding company that conducts our business through various operating subsidiaries. We operate three businesses, our metal container business, our closures business and our plastic container business.
METAL CONTAINERS—62.8 PERCENT OF OUR CONSOLIDATED NET SALES IN 2015
We are a leading manufacturer of metal containers in North America and Europe, and in North America we are the largest manufacturer of metal food containers with a unit volume market share in the United States in 2015 of slightly more than half of the market. Our metal container business is engaged in the manufacture and sale of steel and aluminum containers that are used primarily by processors and packagers for food products, such as soup, vegetables, fruit, meat, tomato based products, seafood, coffee, adult nutritional drinks, pet food and other miscellaneous food products, as well as general line metal containers primarily for chemicals. We have 47 metal container manufacturing facilities located in the United States, Europe and Asia, serving over 50 countries throughout the world. For 2015, our metal container business had net sales of $2.37 billion (approximately 62.8 percent of our consolidated net sales) and income from operations of $236.4 million (approximately 70.4 percent of our consolidated income from operations excluding corporate expense). We estimate that approximately 90 percent of our projected North American metal container sales in 2016 will be pursuant to multi-year customer supply arrangements.
Although metal containers face competition from plastic, paper, glass and composite containers, we believe metal containers are superior to plastic, paper and composite containers in applications where the contents are prepared at high temperatures, or packaged in larger consumer or institutional quantities, or where the long-term storage of the product is desirable while maintaining the product’s quality. We also believe that metal containers are generally more desirable than glass containers because metal containers are more durable and less costly to transport. Additionally, while the market for metal food containers in the United States has experienced little or no growth over the last ten years, we have increased our market share of metal food containers in the United States primarily through acquisitions, such as our recent acquisition of Van Can, and growth with existing customers, and have enhanced our business by focusing on providing customers with high quality, high levels of service and value-added features such as our family of Quick Top® easy-open ends, shaped metal food containers and alternative color offerings for metal food containers. In addition, we have made and continue to make investments for our Can Vision 2020SM program, which investments are intended to enhance the competitive advantages of metal packaging for food. In 2015, we commenced construction of a new metal food container manufacturing facility in the United States to better optimize the logistical footprint of our metal container business in North America. This new facility will allow us to further reduce costs of our metal container business. The construction of this facility is expected to be completed in the first half of 2016.
CLOSURES—21.4 PERCENT OF OUR CONSOLIDATED NET SALES IN 2015
We are a leading worldwide manufacturer of metal, composite and plastic closures for food and beverage products. Our closures business provides customers with an extensive variety of proprietary metal, composite and

6


plastic closures that ensure closure quality and safety, as well as state-of-the-art capping/sealing equipment and detection systems to complement our closures product offering. We have 19 closure manufacturing facilities located in North America, Europe, Asia and South America, from which we serve over 70 countries throughout the world. In addition, we license our technology to five other manufacturers for various markets we do not serve directly. For 2015, our closures business had net sales of $805.0 million (approximately 21.4 percent of our consolidated net sales) and income from operations of $91.8 million (approximately 27.3 percent of our consolidated income from operations excluding corporate expense).
We manufacture metal, composite and plastic closures for food and beverage products, such as juices and juice drinks, ready-to-drink teas, sports and energy drinks, dairy products, ketchup, salsa, pickles, tomato sauce, soup, cooking sauces, gravies, fruits, vegetables, preserves, baby food, baby juices and infant formula products. We provide customers of our closures business with custom formulations of sealing/lining materials, designed to minimize removal torques and to enhance openability of our closures while meeting applicable regulatory requirements. We offer our customers an extensive range of printing options for our closures. We also provide customers with sealing/capping equipment and detection systems to complement our closures product offering for food and beverage products. As a result of our extensive range of closures, our geographic presence and our focus on providing high levels of quality, service and technological support, we believe that we are uniquely positioned to serve food and beverage product companies for their closure needs.
PLASTIC CONTAINERS—15.8 PERCENT OF OUR CONSOLIDATED NET SALES IN 2015
We produce plastic containers from a full range of resin materials and offer a comprehensive array of molding and decorating capabilities. We are one of the leading manufacturers of custom designed high density polyethylene, or HDPE, and polyethylene terephthalate, or PET, containers for the personal care market in North America. Through our acquisition of PFC, we are also a leading manufacturer in North America of plastic thermoformed barrier and non-barrier bowls and trays for shelf-stable food products. We operate 23 plastic container manufacturing facilities in the United States and Canada. For 2015, our plastic container business had net sales of $593.7 million (approximately 15.8 percent of our consolidated net sales) and income from operations of $7.8 million (approximately 2.3 percent of our consolidated income from operations excluding corporate expense). Since 1987, we have improved our market position for our plastic container business, with net sales increasing sevenfold.
We manufacture custom designed and stock plastic containers for personal care and health care products, including containers for mouthwash, shampoos, conditioners, hand creams, lotions, liquid soap, respiratory and gastrointestinal products, cosmetics and toiletries; food and beverage products, including peanut butter, salad dressings, condiments, dairy products, powdered drink mixes and liquor; household and industrial chemical products, including containers for scouring cleaners, cleaning agents and lawn, garden and agricultural products; and pharmaceutical products, including containers for tablets and antacids. We also manufacture plastic closures, caps, sifters and fitments for food and household products, including salad dressings, peanut butter, spices, liquid margarine, powdered drink mixes and arts and crafts supplies. In addition, we manufacture plastic thermoformed barrier and non-barrier bowls and trays for food products, such as soups and other ready-to-eat meals and pet food, as well as thermoformed plastic tubs for personal care and household products, including soft fabric wipes.
Our leading position in the plastic container market is largely driven by our rapid response to our customers’ design, development and technology support needs and our value-added, diverse product line. This product line is the result of our ability to produce plastic containers from a full range of resin materials using a broad array of manufacturing, molding and decorating capabilities. We benefit from our large scale and nationwide presence, as significant consolidation is occurring in many of our customers’ markets. Through these capabilities, we are well-positioned to serve our customers, who demand customized solutions as they continue to seek innovative means to differentiate their products in the marketplace using packaging. In 2015, we commenced construction of two new plastic container manufacturing facilities in the United States, including a near-site facility to a major customer and another facility to meet the growing needs of our customers and allow us to further reduce costs of our plastic container business. The construction of these facilities is expected to be completed in the first half of 2016.
MANUFACTURING AND PRODUCTION
As is the practice in the industry, most of our customers provide us with quarterly or annual estimates of products and quantities pursuant to which periodic commitments are given. These estimates enable us to effectively manage production and control working capital requirements. We schedule our production to meet customers’

7


requirements. Because the production time for our products is short, the backlog of customer orders in relation to our sales is not material.
As of February 1, 2016, we operated a total of 89 manufacturing facilities in 22 different countries throughout the world that serve the needs of our customers.
METAL CONTAINER BUSINESS
The manufacturing operations of our metal container business include cutting, coating, lithographing, fabricating, assembling and packaging finished cans. We use three basic processes to produce cans. The traditional three-piece method requires three pieces of flat metal to form a cylindrical body with a welded
side seam, a bottom and a top. High integrity of the side seam is assured by the use of sophisticated electronic weld monitors and organic coatings that are thermally cured by induction and convection processes. The other two methods of producing cans start by forming a shallow cup that is then formed into the desired height using either the draw and iron process or the draw and redraw process. Using the draw and redraw process, we manufacture steel and aluminum two-piece cans, the height of which generally does not exceed the diameter. For cans the height of which is greater than the diameter, we manufacture steel two-piece cans by using a drawing and ironing process. Quality and stackability of these cans are comparable to that of the shallow two-piece cans described above. We manufacture can bodies and ends from thin, high-strength aluminum alloys and steels by utilizing proprietary tool and die designs and selected can making equipment. We also manufacture our Quick Top® easy-open ends from both steel and aluminum alloys in a sophisticated precision progressive die process. We regularly review our Quick Top® easy-open end designs for improvements for optimum consumer preference through consumer studies and feedback.
CLOSURES BUSINESS
The manufacturing operations for metal closures include cutting, coating, lithographing, fabricating and lining. We manufacture twist-off, lug style and press-on, twist-off steel closures and aluminum roll-on closures for glass, metal and plastic containers, ranging in size from 18 to 110 millimeters in diameter. We employ state-of-the-art multi-die presses to manufacture metal closures, offering a low-cost, high quality means of production. We also provide customers of our closures business with custom formulations of sealing/lining materials, designed to minimize torque removal and enhance the openability of our closures while meeting applicable regulatory requirements.
We utilize two basic processes to produce plastic closures. In the injection molded process, pellets of plastic resin are heated and injected into a mold, forming a plastic closure shell. The shell can include a molded linerless seal or a custom formulated, compression molded sealing system. The shell can then be slit and printed depending on its end use. In the compression molded process, pellets of plastic resin are heated and extruded, and then compressed to form a plastic closure shell. The shell can include a molded linerless seal or a custom formulated, compression molded sealing system. The shell can then be slit and printed depending on its end use. In either process, the shell can also be lined with foil seal systems formulated for its end use.
For composite closures, a metal panel is manufactured using the same manufacturing process for metal closures, including the use of custom formulations of sealing/lining materials, and then it is inserted into a plastic closure shell.
PLASTIC CONTAINER BUSINESS
We utilize two basic processes to produce plastic containers. In the extrusion blowmolding process, pellets of plastic resin are heated and extruded into a tube of plastic. A two-piece metal mold is then closed around the plastic tube and high pressure air is blown into it causing a bottle to form in the mold’s shape. In the injection and injection stretch blowmolding processes, pellets of plastic resin are heated and injected into a mold, forming a plastic preform. The plastic preform is then blown into a bottle-shaped metal mold, creating a plastic bottle.
We also manufacture plastic closures, caps, sifters and fitments using runnerless injection molding technology. In this process, pellets of plastic resin are melted and forced under pressure into a mold, where they take the mold’s shape.
Our plastic thermoformed bowls, trays and tubs are manufactured by melting pellets of plastic resin into an extruded plastic sheet. The plastic sheet is then formed in a mold to make the plastic bowl, tray or tub.

8


We have state-of-the-art decorating equipment, including several of the largest sophisticated decorating facilities in the United States. Our decorating methods for plastic containers are in-mold labeling, which applies a plastic film label to the bottle during the blowing process, and post-mold decoration. Post-mold decoration includes:
silk screen decoration which enables the applications of images in multiple colors to the bottle;
pressure sensitive decoration which uses a plastic film or paper label with an adhesive;
heat transfer decoration which uses a plastic coated label applied by heat;
hot stamping decoration which transfers images from a die using metallic foils; and
shrink sleeve labeling.
RAW MATERIALS
Based upon our existing arrangements with suppliers and our current and anticipated requirements, we believe that we have made adequate provisions for acquiring our raw materials. As a result of significant consolidation of suppliers, we are, however, dependent upon a limited number of suppliers for our steel, aluminum, coatings and compound raw materials. Increases in the prices of raw materials have generally been passed along to our customers in accordance with our multi-year customer supply arrangements and through general price increases.
METAL CONTAINER BUSINESS
We use tinplated and chromium plated steel, aluminum, copper wire, organic coatings, lining compound and inks in the manufacture and decoration of our metal container products. Although there has been significant consolidation of suppliers, we believe that we have made adequate provisions to purchase sufficient quantities of these raw materials for the foreseeable future.
Our metal container supply arrangements with our customers in the United States provide for the pass through of changes in our metal costs. For our non-contract domestic customers, we have also generally increased prices to pass through increases in our metal costs. In Europe, most supply arrangements are negotiated annually, and we generally pass along changes in our raw material costs to customers. Although no assurances can be given, we expect to be able to purchase sufficient quantities of metal to timely meet all of our customers’ requirements in 2016.
Our material requirements are supplied through agreements and purchase orders with suppliers with whom we have long-term relationships. If our suppliers fail to deliver under their arrangements, we would be forced to purchase raw materials on the open market, and no assurances can be given that we would be able to purchase such raw materials or, if we are so able, that we would be able to purchase such raw materials at comparable prices or terms.
CLOSURES BUSINESS
We use tinplated and chromium plated steel, aluminum, organic coatings, low-metallic inks and pulpboard, plastic and organic lining materials in the manufacture of metal closures.
We use resins in pellet form, such as homopolymer polypropylene, copolymer polypropylene and HDPE, thermoplastic elastomer lining materials, processing additives and colorants in the manufacture of plastic closures.
Our domestic closures operations have generally passed along to customers changes in the prices of metal and resin raw materials in accordance with supply arrangements. For non-contract customers, our domestic closures operations have also generally passed through changes in our metal and resin costs. In Europe, most supply arrangements are negotiated annually, and we generally pass along changes in our raw material costs to customers. Although no assurances can be given, we believe we have made adequate provisions to purchase sufficient quantities of these raw materials for the foreseeable future, despite the significant consolidation of suppliers.
PLASTIC CONTAINER BUSINESS
The raw materials we use in our plastic container business are primarily resins in pellet form such as virgin HDPE, virgin PET, recycled HDPE, recycled PET, polypropylene and, to a lesser extent, polystyrene, low density polyethylene, polyethylene terephthalate glycol, polyvinyl chloride and medium density polyethylene. Our resin

9


requirements are acquired through multi-year arrangements for specific quantities of resins with several major suppliers of resins. The price that we pay for resin raw materials is not fixed and is subject to market pricing, which has fluctuated significantly in the past few years. Our plastic container business has passed along to our customers changes in the prices of our resin raw materials in accordance with customer supply arrangements.
We believe that we have made adequate provisions to purchase sufficient quantities of resins for the foreseeable future, absent unforeseen events such as significant hurricanes.
SALES AND MARKETING
Our philosophy has been to develop long-term customer relationships by acting in partnership with our customers, providing reliable quality and service. We market our products primarily by a direct sales force and for our plastic container business, in part, through a network of distributors. Because of the high cost of transporting empty containers, our metal container business generally sells to customers within a 300 mile radius of its manufacturing plants.
Approximately 12 percent of our consolidated net sales were to Nestlé in each of 2015, 2014 and 2013. No other customer accounted for more than 10 percent of our total consolidated net sales during those years.
You should also read “Risk Factors—We face competition from many companies and we may lose sales or experience lower margins on sales as a result of such competition” included elsewhere in this Annual Report.
METAL CONTAINER BUSINESS
We are a leading manufacturer of metal containers in North America and Europe, and in North America we are the largest manufacturer of metal food containers with a unit volume market share in the United States in 2015 of slightly more than half of the market. We have 47 metal container manufacturing facilities located in the United States, Europe and Asia, serving over 50 countries throughout the world. Our largest customers for these products include Bonduelle Group, Campbell, Chicken of the Sea, ConAgra Foods, Inc., Del Monte, General Mills, Inc., Hill's Pet Nutrition, Inc., Hormel Foods Corporation, Kraft Heinz Company, Mars, Incorporated, Nestlé, Pacific Coast, Pinnacle Foods Group LLC, Stanislaus Food Products Company and TreeHouse Foods, Inc.
We have entered into multi-year supply arrangements with many of our customers, including Nestlé, Campbell and other food producers. We estimate that approximately 90 percent of our projected North American metal container sales in 2016 will be pursuant to multi-year customer supply arrangements. Historically, we have been successful in continuing these multi-year customer supply arrangements. In Europe, our metal container business has had long-term relationships with many of its customers, although, as is common practice, many supply arrangements are negotiated on a year-by-year basis.
Since our inception in 1987, we have supplied Nestlé with substantially all of its U.S. metal food container requirements purchased from third party manufacturers. Our net sales of metal food containers to Nestlé in 2015 were $416.9 million. We have a supply agreement with Nestlé for a substantial portion of the metal food containers we supply Nestlé, which agreement runs through December 2019. In September 2011, we acquired Purina Steel Can from Nestlé and consolidated such assets into our existing metal container facilities in the United States. In connection with this acquisition, we entered into a long-term supply agreement with Nestlé that runs through December 2021 for the steel container volume previously manufactured by Purina Steel Can. In addition to these supply agreements, other metal food containers that we sell to Nestlé are supplied pursuant to a shorter-term supply agreement. Each of these supply agreements provide for certain prices and specify that those prices will be increased or decreased based upon cost change formulas.
Our metal container business’ sales and income from operations are 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. The size and quality of these harvests varies from year to year, depending in large part upon the weather conditions in those 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. You should also read “Risk Factors—The seasonality of the fruit and vegetable packing industry causes us to incur short-term debt” included elsewhere in this Annual Report.


10


CLOSURES BUSINESS
We are a leading worldwide manufacturer of metal, composite and plastic closures for food and beverage products. We have 19 closure manufacturing facilities located in North America, Europe, Asia and South America, from which we serve over 70 countries throughout the world.
Our largest customers of our closures business include All Star Dairy Association, Inc., Andros Group, Grupo Lala and its affiliated entities including Borden Dairy Company, Inc., Campbell, The Coca-Cola Company, Dean Foods Company, Dr Pepper Snapple Group, Inc., Kraft Heinz Company, Hipp GmbH & Co KG, The J.M. Smucker Company, The Kroger Co., MillerCoors LLC, The Mizkan Group Corporation, Nestlé, PepsiCo Inc. and TreeHouse Foods, Inc. We have multi-year supply arrangements with many of our customers in the United States. Outside of the United States, the closures business has had long-term relationships with most of its customers, although, as is common practice, many supply arrangements are negotiated on a year-by-year basis.
In addition, we license our technology to five other manufacturers who supply products in China, India, Israel, South Korea, Malaysia, Maldives, South Africa, Sri Lanka, Taiwan and Thailand.
PLASTIC CONTAINER BUSINESS
We are one of the leading manufacturers of custom designed and stock plastic containers sold in North America for a variety of markets, including the personal care, food, health care and household and industrial chemical markets. We are also a leading manufacturer in North America of plastic thermoformed barrier and non-barrier bowls and trays for shelf-stable food products. We market our plastic containers and closures in most areas of North America through a direct sales force and a large network of distributors. We also market certain stock plastic containers for personal care and health care products through an on-line shopping catalog.
Our largest customers for our plastic container business include Bayer AG, Berlin Packaging LLC, Campbell, The Clorox Company, ConAgra Foods, Inc., General Mills, Inc., Johnson & Johnson, Kraft Heinz Company, Mars, Incorporated, McCormick & Company, Inc., The Procter & Gamble Company, The Scotts Company LLC, The Sun Products Corporation, TreeHouse Foods, Inc., TricorBraun and Vi-Jon Laboratories, Inc.
We have arrangements to sell some of our plastic containers and closures to distributors, who in turn resell those products primarily to regional customers. Plastic containers sold to distributors are generally manufactured by using generic and custom molds with decoration added to meet the end users’ requirements. The distributors’ warehouses and their sales personnel enable us to market and inventory a wide range of such products to a variety of customers.
We have written purchase orders or contracts for the supply of containers with the majority of our customers. In general, these purchase orders and contracts are for containers made from proprietary molds and are for a duration of one to five years.
COMPETITION
The packaging industry is highly competitive. We compete in this industry with manufacturers of similar and other types of packaging, as well as fillers, food processors and packers who manufacture containers for their own use and for sale to others. We attempt to compete effectively through the quality of our products, competitive pricing and our ability to meet customer requirements for delivery, performance and technical assistance.
METAL CONTAINER BUSINESS
Of the commercial metal container manufacturers, Ardagh Group, Ball Corporation and Crown Holdings, Inc. are our most significant competitors. Our competitors also include other regional suppliers. As an alternative to purchasing containers from commercial can manufacturers, customers have the ability to invest in equipment to self-manufacture their containers.
Because of the high cost of transporting empty containers, our metal container business generally sells to customers within a 300 mile radius of its manufacturing plants. Strategically located existing plants give us an advantage over competitors from other areas, but we could be potentially disadvantaged by the relocation of a major customer.
Although metal containers face competition from plastic, paper, glass and composite containers, we believe that metal containers are superior to plastic, composite and paper containers in applications, where the contents

11


are prepared at high temperatures or packaged in larger consumer or institutional quantities or where long-term storage of the product is desirable while maintaining the product’s quality. We also believe that metal containers are more desirable generally than glass containers because metal containers are more durable and less costly to transport.
CLOSURES BUSINESS
Our closures business competes primarily with Bericap Group, Berry Plastics Corporation, Closures Systems International, Inc. (part of Rank Group Limited), Crown Holdings, Inc., Global Closure Systems, Groupe Massilly and Tecnocap S.p.A. With our ability to manufacture an extensive range of metal, composite and plastic closures as well as state-of-the-art capping/sealing equipment and detection systems and our geographic presence, we believe we are uniquely positioned to serve food and beverage product companies for their closure needs.
PLASTIC CONTAINER BUSINESS
Our plastic container business competes with a number of large national producers of plastic containers and closures for personal care, food, health care, pharmaceutical, household and industrial chemical, pet care, agricultural, automotive and marine chemical products. These competitors include Alpha Packaging, Alpla-Werke Alwin Lehner GmbH & Co. KG, Amcor Limited, Berry Plastics Corporation, CCL Industries Inc., Cebal Americas, Consolidated Container Company LLC, Graham Packaging Company (part of Rank Group Limited) and Plastipak Packaging Inc. To compete effectively in the constantly changing market for plastic containers and closures, we must remain current with, and to some extent anticipate, innovations in resin composition and applications and changes in the technology for the manufacturing of plastic containers and closures.
EMPLOYEES
As of December 31, 2015, we employed approximately 2,400 salaried and 7,200 hourly employees on a full-time basis. Approximately 40 percent of our hourly plant employees in the United States and Canada as of that date were represented by a variety of unions, and most of our hourly employees in Europe, Asia, South America and Central America were represented by a variety of unions or other labor organizations. In addition, as of December 31, 2015, Campbell provided us with approximately 120 hourly employees on a full-time basis at one of the facilities that we lease from Campbell.
Our labor contracts expire at various times between 2016 and 2018. As of December 31, 2015, contracts covering approximately 15 percent of our hourly employees in the United States and Canada will expire during 2016. We expect no significant changes in our relations with these unions.
ENVIRONMENTAL AND OTHER REGULATIONS
We are subject to federal, foreign, state and local environmental laws and regulations. In general, these laws and regulations limit the discharge of pollutants into the environment and establish standards for the treatment, storage, and disposal of solid and hazardous waste. We believe that we are either in compliance in all material respects with all presently applicable environmental laws and regulations or are operating in accordance with appropriate variances, schedules under compliance orders or similar arrangements.
In addition to costs associated with regulatory compliance, we may be held liable for alleged environmental damage associated with the past disposal of hazardous substances. Those that generate hazardous substances that are disposed of at sites at which environmental problems are alleged to exist, as well as the owners of those sites and other classes of persons, are subject to claims for clean up and natural resource damages under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, or CERCLA, regardless of fault or the legality of the original disposal. CERCLA and many similar state and foreign statutes may hold a responsible party liable for the entire cleanup cost at a particular site even though that party may not have caused the entire problem. Other state statutes may impose proportionate rather than joint and several liability. The federal Environmental Protection Agency or a state or foreign agency may also issue orders requiring responsible parties to undertake removal or remedial actions at sites.
We are also subject to the Occupational Safety and Health Act and other federal, foreign, state and local laws regulating noise exposure levels and other safety and health concerns in the production areas of our plants.
While management does not believe that any of the regulatory matters described above, individually or in the aggregate, will have a material effect on our capital expenditures, earnings, financial position or competitive position, we cannot assure you that a material environmental or other regulatory claim will not arise in the future.

12


RESEARCH AND PRODUCT DEVELOPMENT
Our research, product development and product engineering efforts relating to our metal container business are conducted at our research facilities in Oconomowoc, Wisconsin. Our research, product development and product engineering efforts relating to our metal, composite and plastic closures business for food and beverage products are conducted at our research facilities in Downers Grove, Illinois and Hannover, Germany. Our research, product development and product engineering efforts with respect to our plastic container business are performed by our manufacturing and engineering personnel located at our Norcross, Georgia facility. In addition to research, product development and product engineering, these sites also provide technical support to our customers. The amounts we have spent on research and development during the last three fiscal years are not material.
We rely on a combination of patents, trade secrets, unpatented know-how, technological innovation, trademarks and other intellectual property rights, nondisclosure agreements and other protective measures to protect our intellectual property. We do not believe that any individual item of our intellectual property portfolio is material to our business. We employ various methods, including confidentiality agreements and nondisclosure agreements, with third parties, employees and consultants to protect our trade secrets and know-how. However, others could obtain knowledge of our trade secrets and know-how through independent development or other means.
FINANCIAL INFORMATION ABOUT SEGMENTS AND GEOGRAPHIC AREAS
Financial and other information by segment and relating to geographic areas for the fiscal years ended December 31, 2015, December 31, 2014 and December 31, 2013 is set forth in Note 16 to our Consolidated Financial Statements for the year ended December 31, 2015 included elsewhere in this Annual Report.
For the year ended December 31, 2015, our foreign operations for all our businesses generated $749.9 million of net sales, which represents approximately 20 percent of our consolidated net sales worldwide. For a discussion of risks attendant to our foreign operations, see “Risk Factors—Global economic conditions, disruptions in the credit markets and the instability of the Euro could adversely affect our business, financial condition or results of operations,” “Risk Factors—Our international operations are subject to various risks that may adversely affect our financial results” and “Risk Factors—We are subject to the effects of fluctuations in foreign currency exchange rates” included elsewhere in this Annual Report, as well as “Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Exchange Rate Risk” included elsewhere in this Annual Report.
AVAILABLE INFORMATION
We file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission, or the SEC. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains annual, quarterly and current reports, proxy statements and other information that issuers (including the Company) file electronically with the SEC. The Internet address of the SEC’s website is http://www.sec.gov.
We maintain a website, the Internet address of which is http://www.silganholdings.com. Information contained on our website is not part of this Annual Report. We make available free of charge on or through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K (and any amendments to those reports) and Forms 3, 4 and 5 filed on behalf of our directors and executive officers as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the SEC.


13


ITEM 1A. RISK FACTORS.
The following are certain risk factors that could materially and adversely affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known to us or that we currently view as immaterial may also materially and adversely affect our business, financial condition or results of operations.
OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR CASH FLOW.
At December 31, 2015, we had $1,525.8 million of total consolidated indebtedness. We incurred much of this indebtedness as a result of financing acquisitions and refinancing our previously outstanding debt. In addition, after taking into account letters of credit of $22.7 million, we have up to $962.9 million and Cdn $15.0 million of revolving loans that we may borrow under our Credit Agreement. We also have available to us under our Credit Agreement an uncommitted multicurrency incremental loan facility in an amount of up to an additional $1.25 billion (which amount may be increased as provided under our Credit Agreement), and we may incur additional indebtedness as permitted by our Credit Agreement and our other instruments governing our indebtedness.
A significant portion of our cash flow must be used to service our indebtedness and is therefore not available to be used in our business. In 2015, we repaid $37.3 million in principal and paid $64.0 million in interest on our indebtedness. Our ability to generate cash flow is subject to general economic, financial, competitive, legislative, regulatory and other factors that may be beyond our control. In addition, a substantial portion of our indebtedness bears interest at floating rates, and therefore a substantial increase in interest rates could adversely impact our results of operations. Based on the average outstanding amount of our variable rate indebtedness in 2015, a one percentage point change in the interest rates for our variable rate indebtedness would have impacted our 2015 interest expense by an aggregate of approximately $9.3 million, after taking into account the average outstanding notional amount of our interest rate swap agreements during 2015.
Our indebtedness could have important consequences. For example, it could:
increase our vulnerability to general adverse economic and industry conditions;
require us to dedicate a significant portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, acquisitions and capital expenditures, and for other general corporate purposes;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
restrict us from making strategic acquisitions or exploiting business opportunities; and
limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds.
DESPITE OUR CURRENT LEVELS OF INDEBTEDNESS, WE MAY INCUR ADDITIONAL DEBT IN THE FUTURE, WHICH COULD INCREASE THE RISKS ASSOCIATED WITH OUR LEVERAGE.
We are continually evaluating and pursuing acquisition opportunities in the consumer goods packaging market and may incur additional indebtedness, including indebtedness under our Credit Agreement, to finance any such acquisitions and to fund any resulting increased operating needs. If new debt is added to our current debt levels, the related risks we now face could increase. We will have to effect any new financing in compliance with the agreements governing our then existing indebtedness. The indentures governing our 5% Senior Notes due 2020, or the 5% Notes, and the 5½% Notes do not prohibit us from incurring additional indebtedness.
THE TERMS OF OUR DEBT INSTRUMENTS RESTRICT THE MANNER IN WHICH WE CONDUCT OUR BUSINESS AND MAY LIMIT OUR ABILITY TO IMPLEMENT ELEMENTS OF OUR GROWTH STRATEGY.
Our Credit Agreement contains numerous covenants, including financial and operating covenants, some of which are quite restrictive. These covenants affect, and in many respects limit, among other things, our ability to:
incur additional indebtedness;
create liens;
consolidate, merge or sell assets;

14


make certain advances, investments and loans;
enter into certain transactions with affiliates; and
engage in any business other than the packaging business and certain related businesses.
The indentures governing the 5% Notes and the 5½% Notes contain certain covenants that also restrict our ability to create liens, engage in sale and leaseback transactions and consolidate, merge or sell assets. These covenants could restrict us in the pursuit of our growth strategy.
GLOBAL ECONOMIC CONDITIONS, DISRUPTIONS IN THE CREDIT MARKETS AND THE INSTABILITY OF THE EURO COULD ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS.
In the recent past, the global financial markets have experienced substantial disruption, including, among other things, volatility in securities prices, diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others. Additionally, the global economy experienced a recession, and economic weakness has generally continued in European markets and, more recently, has arisen in China. If such economic conditions, disruption of global financial markets and tightening of credit in the financial markets were to occur again, then, among other risks we face, our business, financial condition, results of operations and ability to obtain additional financing in the future, including on terms satisfactory to us, could be adversely affected.
Economic conditions and disruptions in the credit markets could also harm the liquidity or financial position of our customers or suppliers, which could in turn cause such parties to fail to meet their contractual or other obligations to us or reduce our customers’ purchases from us, any of which could negatively affect our business, financial condition or results of operations. Additionally, under such circumstances, the creditworthiness of the counterparties to our interest rate and commodity pricing transactions could deteriorate, thereby increasing the risk that such counterparties fail to meet their contractual obligations to us.
Additionally, there has been concern regarding the overall stability of the Euro and the future of the Euro as a single currency given the diverse economic and political circumstances in individual Eurozone countries. Potential negative developments (such as a Eurozone country in which we operate replacing the Euro with its own currency) and market perceptions related to the Euro could adversely affect the value of our Euro-denominated assets, reduce the amount of our translated amounts of U.S. dollar revenue and income from operations, negatively impact our indebtedness in any such Eurozone country (including our ability to refinance such indebtedness) and otherwise negatively affect our business, financial condition or results of operations.
WE FACE COMPETITION FROM MANY COMPANIES AND WE MAY LOSE SALES OR EXPERIENCE LOWER MARGINS ON SALES AS A RESULT OF SUCH COMPETITION.
The manufacture and sale of metal and plastic containers and closures is highly competitive. We compete with other manufacturers of metal and plastic containers and closures and manufacturers of alternative packaging products, as well as packaged goods companies who manufacture containers and closures for their own use and for sale to others. We compete primarily on the basis of price, quality and service. To the extent that any of our competitors is able to offer better prices, quality and/or services, we could lose customers and our sales and margins may decline.
Approximately 90 percent of our North American metal container sales, a majority of sales of our domestic closures operations and a majority of sales of our plastic container business in 2015 were pursuant to multi-year supply arrangements. In general, many of these arrangements provide that during the term the customer may receive competitive proposals for all or up to a portion of the products we furnish to the customer. We have the right to retain the business subject to the terms and conditions of the competitive proposal. If we match a competitive proposal, it may result in reduced sales prices for the products that are the subject of the proposal. If we choose not to match a competitive proposal, we may lose the sales that were the subject of the proposal.
In addition, the loss of any major customer, a significant reduction in the purchasing levels of any major customer or a significant adverse change in the terms of our supply agreement with any major customer could adversely affect our results of operations.


15


DEMAND FOR OUR PRODUCTS COULD BE AFFECTED BY CHANGES IN LAWS AND REGULATIONS APPLICABLE TO FOOD AND BEVERAGES AND CHANGES IN CONSUMER PREFERENCES.
We manufacture and sell metal and plastic rigid packaging for shelf-stable food and other consumer goods products. Many of our products are used to package food and beverages, and therefore they come into direct contact with these products. Accordingly, such products must comply with various laws and regulations for food and beverages applicable to our customers. Changes in such laws and regulations could negatively impact our customers’ demand for our products as they comply with such changes and/or require us to make changes to our products. Such changes to our products could include modifications relating to the inclusion of bisphenol A in the coatings and compounds that we use, possibly resulting in the incurrence by us of additional costs. Additionally, because our products are used to package consumer goods, we are subject to a variety of risks that could influence consumer behavior and negatively impact demand for our products, including changes in consumer preferences driven by various health-related concerns and perceptions.
OUR FINANCIAL RESULTS COULD BE ADVERSELY AFFECTED IF WE ARE NOT ABLE TO OBTAIN SUFFICIENT QUANTITIES OF RAW MATERIALS OR MAINTAIN OUR ABILITY TO PASS RAW MATERIAL PRICE INCREASES THROUGH TO OUR CUSTOMERS.
We purchase steel, aluminum, plastic resins and other raw materials from various suppliers. Sufficient quantities of these raw materials may not be available in the future, whether due to reductions in capacity because of, among other things, significant consolidation of suppliers, increased demand in excess of available supply, unforeseen events such as significant hurricanes or other reasons. In addition, such materials are subject to price fluctuations due to a number of factors, including increases in demand for the same raw materials, the availability of other substitute materials and general economic conditions that are beyond our control.
Over the last few years, there has been significant consolidation of suppliers of steel. Additionally, tariffs and court cases in the United States have negatively impacted the ability and desire of certain foreign steel suppliers to competitively supply steel in the United States. Our metal container and metal closures supply arrangements with our customers in the United States provide for the pass through of changes in our metal costs in accordance with such arrangements. For our non-contract customers in the United States, we also generally increase prices to pass through increases in our metal costs. In Europe, our metal container and metal closures operations have had long-term relationships with many of their customers and we generally increase prices to pass through increases in our metal costs, although, as is common practice, supply arrangements are negotiated on a year-by-year basis.
Our resin requirements are acquired through multi-year arrangements for specific quantities of resins with several major suppliers of resins. The prices that we pay for resins are not fixed and are subject to market pricing, which has fluctuated significantly in the past few years. Our plastic container and plastic closures supply arrangements with our customers in North America provide for the pass through of changes in resin prices in accordance with such arrangements, subject in most cases to a lag in the timing of such pass through. For non-contract customers, we also generally pass through changes in resin prices.
Although no assurances can be given, we expect to be able to purchase sufficient quantities of raw materials to timely meet all of our customers’ requirements in 2016. Additionally, although no assurances can be given, we generally have been able to pass raw material price increases through to our customers. The loss of our ability to pass those price increases through to our customers or the inability of our suppliers to meet our raw material requirements, however, could have a materially adverse impact on our business, financial condition or results of operations.
A SUBSTANTIALLY LOWER THAN NORMAL CROP YIELD MAY REDUCE DEMAND FOR OUR METAL CONTAINERS AND CLOSURES FOR FOOD PRODUCTS.
Our metal container business’ sales and income from operations are 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 closures business is also dependent, in part, upon the 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, and our results of operations could be impacted accordingly. Our sales, income from operations and net income could be materially adversely affected in a year in which crop yields are substantially lower than normal.

16


THE SEASONALITY OF THE FRUIT AND VEGETABLE PACKING INDUSTRY CAUSES US TO INCUR SHORT-TERM DEBT.
We sell metal containers and closures used to package fruits and vegetables, which is a seasonal process. As a result, we have historically generated a disproportionate amount of our annual income from operations in our third quarter. Additionally, as is common in the packaging industry, we must access working capital to build inventory ahead of the fruit and vegetable packing process. We also provide extended payment terms to some of our customers due to the seasonality of the fruit and vegetable packing process and, accordingly, carry accounts receivable for some customers beyond the end of the packing season. Due to our seasonal requirements, we may incur short-term indebtedness to finance our working capital requirements.
THE COST OF PRODUCING OUR PRODUCTS MAY BE ADVERSELY AFFECTED BY INCREASES TO THE PRICE OF ENERGY.
The cost of producing our products is sensitive to our energy costs, such as natural gas and electricity. We have, from time to time, entered into contracts to hedge a portion of our natural gas costs. Energy prices, in particular oil and natural gas prices, have been volatile in recent years, with a corresponding effect on our production costs.
WE MAY NOT BE ABLE TO PURSUE OUR GROWTH STRATEGY BY ACQUISITION.
Historically, we have grown predominantly through acquisitions. Our future growth will depend in large part on additional acquisitions of consumer goods packaging businesses. We may not be able to locate or acquire other suitable acquisition candidates consistent with our strategy, and we may not be able to fund future acquisitions because of limitations under our indebtedness or otherwise, including due to the limited availability of funds if the financial markets are impaired.
FUTURE ACQUISITIONS MAY CREATE RISKS AND UNCERTAINTIES THAT COULD ADVERSELY AFFECT OUR OPERATING RESULTS AND DIVERT OUR MANAGEMENTS ATTENTION.
In pursuing our strategy of growth through acquisitions, we will face risks commonly encountered with an acquisition strategy. These risks include:
failing to identify material problems and liabilities in our due diligence review of acquisition targets;
failing to obtain sufficient indemnification rights to fully offset possible liabilities associated with acquired businesses;
failing to assimilate the operations and personnel of the acquired businesses;
difficulties in identifying or retaining employees for the acquired businesses;
disrupting our ongoing business;
diluting our limited management resources;
operating in new geographic regions; and
impairing relationships with employees and customers of the acquired business as a result of changes in ownership and management.
Through our experience integrating our acquisitions, we have learned that, depending upon the size of the acquisition, it can take us up to two to three years to completely integrate an acquired business into our operations and systems and realize the full benefit of the integration. During the early part of this integration period, the operating results of an acquired business may decrease from results attained prior to the acquisition due to costs, delays or other challenges that arise when integrating the acquired business. In addition, we may not be able to achieve potential synergies or maintain the levels of revenue, earnings or operating efficiency that each business had achieved or might achieve separately. Moreover, indebtedness incurred to fund acquisitions could adversely affect our liquidity and financial stability.
WE MAY BE UNABLE TO ACHIEVE, OR MAY BE DELAYED IN ACHIEVING, ADEQUATE RETURNS FROM OUR EFFORTS TO OPTIMIZE OUR OPERATIONS, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

We continually strive to improve our operating performance and further enhance our franchise positions in our businesses through the investment of capital for productivity improvements, manufacturing efficiencies, manufacturing cost reductions and the rationalization of our manufacturing facilities footprints. Our operations include complex manufacturing systems as well as intricate scheduling and numerous geographic and logistical

17


complexities associated with our facilities and our customers’ facilities. Accordingly, our efforts to achieve productivity improvements, manufacturing efficiencies and manufacturing cost reductions and to rationalize our manufacturing facilities footprints are subject to a number of risks and uncertainties that could impact our ability to achieve adequate returns from our efforts as planned. These risks and uncertainties include, among others, completing any such efforts on time and as planned and retaining customers impacted thereby.
IF WE ARE UNABLE TO RETAIN KEY MANAGEMENT, WE MAY BE ADVERSELY AFFECTED.
We believe that our future success depends, in large part, on our experienced management team. Losing the services of key members of our current management team could make it difficult for us to manage our business and meet our objectives.
PROLONGED WORK STOPPAGES AT OUR FACILITIES WITH UNIONIZED LABOR COULD JEOPARDIZE OUR FINANCIAL CONDITION.
As of December 31, 2015, we employed approximately 7,200 hourly employees on a full-time basis. Approximately 40 percent of our hourly plant employees in the United States and Canada as of that date were represented by a variety of unions, and most of our hourly employees in Europe, Asia, South America and Central America were represented by a variety of unions or other labor organizations. Our labor contracts expire at various times between 2016 and 2018. We cannot assure you that, upon expiration of existing collective bargaining agreements, new agreements will be reached without union action or that any such new agreements will be on terms no less favorable to us than current agreements. Disputes with the unions representing our employees could result in strikes or other labor protests that could disrupt our operations and divert the attention of management from operating our business. If we were to experience a strike or work stoppage, it could be difficult for us to find a sufficient number of people with the necessary skills to replace those employees. Prolonged work stoppages at our facilities could have a material adverse effect on our business, financial condition or results of operations.
WE ARE SUBJECT TO COSTS AND LIABILITIES RELATED TO ENVIRONMENTAL AND HEALTH AND SAFETY LAWS AND REGULATIONS AND RISKS RELATED TO LEGAL PROCEEDINGS.
We continually review our compliance with environmental and other laws, such as the Occupational Safety and Health Act and other laws regulating noise exposure levels and other safety and health concerns in the production areas of our plants in the United States and environmental protection, health and safety laws and regulations abroad. We may incur liabilities for noncompliance, or substantial expenditures to achieve compliance, with environmental and other laws or changes thereto in the future or as a result of the application of additional laws and regulations to our business, including those limiting greenhouse gas emissions and those requiring compliance with the European Commission’s registration, evaluation and authorization of chemicals (REACH) procedures. In addition, stricter regulations, or stricter interpretations of existing laws or regulations, may impose new liabilities on us, and we may become obligated in the future to incur costs associated with the investigation and/or remediation of contamination at our facilities or other locations. Additionally, many of our products come into contact with the food and beverages that they package, and therefore we may be subject to risks and liabilities related to health and safety matters in connection with our products. Changes in or additional health and safety laws and regulations in connection with our products may also impose new requirements and costs on us. Such requirements, liabilities and costs could have a material adverse effect on our capital expenditures, results of operations, financial condition or competitive position.
We are involved in various legal proceedings, contract disputes and claims arising in the ordinary course of our business. Additionally, a competition authority in Germany commenced an antitrust investigation involving the industry association for metal packaging in Germany and its members, including our metal container and closures subsidiaries in Germany. Although we are not able to predict the outcome of such proceedings, investigations, disputes and claims, any payments in respect thereof, including pursuant to any settlements, will reduce our available cash flows and could adversely impact our results of operations.
OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO VARIOUS RISKS THAT MAY ADVERSELY AFFECT OUR FINANCIAL RESULTS.
Our international operations generated approximately $749.9 million, or approximately 20 percent, of our consolidated net sales in 2015. As of February 1, 2016, we have a total of 36 manufacturing facilities in a total of 21 countries, including Canada and countries located in Europe, Asia, South America and Central America, serving customers in over 90 countries worldwide. Our business strategy may include continued expansion of international activities. Accordingly, the risks associated with operating in foreign countries may have a negative impact on our liquidity and net income. For example, the current economic uncertainty in Europe and China and the geopolitical disruptions in the Ukraine, Russia and the Middle East and related adverse economic conditions may have an

18


adverse effect on our results of operations and financial condition. Additionally, we shut down our closures manufacturing facility in Venezuela in the fourth quarter of 2014 because our operations in Venezuela were unable to import raw materials on a regular basis due to the ongoing unstable political environment and an increasingly restrictive monetary policy.
Risks associated with operating in foreign countries include, but are not limited to:
political, social and economic instability;
inconsistent product regulation or policy changes by foreign agencies or governments;
war, civil disturbance or acts of terrorism;
compliance with and changes in applicable foreign laws;
loss or non-renewal of treaties or similar agreements with foreign tax authorities;
difficulties in enforcement of contractual obligations and intellectual property rights;
high social benefits for labor;
national and regional labor strikes;
imposition of limitations on conversions of foreign currencies into U.S. dollars or payment of dividends and other payments by non-U.S. subsidiaries;
foreign exchange rate risks;
difficulties in expatriating cash generated or held by non-U.S. subsidiaries in a tax efficient manner;
uncertainties arising from local business practices and cultural considerations;
changes in tax laws, or the interpretation thereof, affecting foreign tax credits or tax deductions relating to our non-U.S. earnings or operations;
hyperinflation, currency devaluation or defaults in certain foreign countries;
duties, taxes or government royalties, including the imposition or increase of withholding and other taxes on remittances and other payments by non-U.S. subsidiaries;
customs, import/export and other trade compliance regulations;
non-tariff barriers and higher duty rates;
difficulty in collecting international accounts receivable and potentially longer payment cycles;
application of the Foreign Corrupt Practices Act and similar laws;
increased costs in maintaining international manufacturing and marketing efforts; and
taking of property by nationalization or expropriation without fair compensation.
WE ARE SUBJECT TO THE EFFECTS OF FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES.
Our reporting currency is the U.S. dollar. As a result of our international operations, a portion of our consolidated net sales, and some of our costs, assets and liabilities, are denominated in currencies other than the U.S. dollar. As a result, we must translate local currency financial results into U.S. dollars based on average exchange rates prevailing during a reporting period for the preparation of our consolidated financial statements. Consequently, changes in exchange rates may unpredictably and adversely affect our consolidated operating results. For example, during times of a strengthening U.S. dollar, our reported international revenue and earnings will be reduced because the local currency will translate into fewer U.S. dollars. Conversely, a weakening U.S. dollar will effectively increase the dollar-equivalent of our expenses denominated in foreign currencies. Although we may use currency exchange rate protection agreements from time to time to reduce our exposure to currency exchange rate fluctuations in some cases, these hedges may not eliminate or reduce the effect of currency fluctuations.

19


IF THE INVESTMENTS IN OUR PENSION BENEFIT PLANS DO NOT PERFORM AS EXPECTED, WE MAY HAVE TO CONTRIBUTE ADDITIONAL AMOUNTS TO THESE PLANS, WHICH WOULD OTHERWISE BE AVAILABLE TO COVER OPERATING AND OTHER EXPENSES.
We maintain noncontributory, defined benefit pension plans covering a substantial number of our employees, which we fund based on certain actuarial assumptions. The plans’ assets consist primarily of common stocks and fixed income securities. If the investments of the plans do not perform at expected levels, then we will have to contribute additional funds to ensure that the plans will be able to pay out benefits as scheduled. Such an increase in funding could result in a decrease in our available cash flow.
WE PARTICIPATE IN MULTIEMPLOYER PENSION PLANS UNDER WHICH, IN THE EVENT OF CERTAIN CIRCUMSTANCES, WE COULD INCUR ADDITIONAL LIABILITIES WHICH MAY BE MATERIAL AND MAY NEGATIVELY AFFECT OUR FINANCIAL RESULTS,
We participate in four multiemployer pension plans which provide defined benefits to certain of our union employees.  Because of the nature of multiemployer pension plans, there are risks associated with participating in such plans that differ from single-employer pension plans.  Amounts contributed by an employer to a multiemployer pension plan are not segregated into a separate account and are not restricted to provide benefits only to employees of that contributing employer.  In the event that another participating employer to a multiemployer pension plan in which we participate no longer contributes to such plan, the unfunded obligations of such plan may be borne by the remaining participating employers, including us.  In such event, our required contributions to such plan could increase, which could negatively affect our financial condition and results of operations.  In the event that we withdraw from participation in a multiemployer pension plan in which we participate or otherwise cease to make contributions to such a plan or in the event of the termination of such a plan, we potentially could be required under applicable law to make additional contributions to such plan in respect of the unfunded accrued benefits of such plan, which unfunded accrued benefits could be significant.  Such additional contributions could be material and could negatively affect our financial condition and results of operations.  As further discussed in Note 11 to our Consolidated Financial Statements for the year ended December 31, 2015 included elsewhere in this Annual Report, two of the multiemployer pension plans in which we participate have a funded status of less than 65 percent.
IF WE WERE REQUIRED TO WRITE-DOWN ALL OR PART OF OUR GOODWILL OR TRADE NAMES, OUR NET INCOME AND NET WORTH COULD BE MATERIALLY ADVERSELY AFFECTED.
As a result of our acquisitions, we have $612.8 million of goodwill and $32.1 million of indefinite-lived trade names recorded on our consolidated balance sheet at December 31, 2015. We are required to periodically determine if our goodwill and trade names have become impaired, in which case we would write-down the impaired portion. If we were required to write-down all or part of our goodwill or trade names, our net income and net worth could be materially adversely affected.

INCREASED INFORMATION TECHNOLOGY SECURITY THREATS AND MORE SOPHISTICATED AND TARGETED COMPUTER CRIME COULD POSE A RISK TO OUR SYSTEMS, NETWORKS, PRODUCTS, SOLUTIONS AND SERVICES.
Increased global security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. While we attempt to mitigate these risks by employing a number of measures, including employee training, comprehensive monitoring of our networks and systems and maintenance of backup and protective systems, our systems, networks, products, solutions and services remain potentially vulnerable to advanced persistent threats. Depending on their nature and scope, such threats could potentially lead to the compromise of confidential information, improper use of our systems and networks, manipulation and destruction of data, defective products, production downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations.
OUR PRINCIPAL STOCKHOLDERS HAVE SUBSTANTIAL INFLUENCE OVER US AND THEIR EXERCISE OF THAT INFLUENCE COULD BE ADVERSE TO YOUR INTERESTS.
As of December 31, 2015, Messrs. Silver and Horrigan beneficially owned an aggregate of 19,420,204 shares of our common stock, or approximately 32 percent of our outstanding common stock. Accordingly, if they act together, they will be able to exercise substantial influence over all matters submitted to the stockholders for a vote, including the election of directors. In addition, we and Messrs. Silver and Horrigan have entered into an amended and restated principal stockholders agreement, or the Stockholders Agreement, that provides for certain director nomination rights. Under the Stockholders Agreement, the Group (as defined in the Stockholders Agreement and

20


generally including Messrs. Silver and Horrigan and their affiliates and related family transferees and estates) has the right to nominate for election all of our directors until the Group holds less than one-half of the number of shares of our common stock held by it in the aggregate on February 14, 1997. At least one of the Group’s nominees must be either Mr. Silver or Mr. Horrigan during the three-year period covering the staggered terms of our three classes of directors. On February 14, 1997, the Group held 28,612,360 shares of our common stock in the aggregate (as adjusted for our two-for-one stock splits in 2005 and 2010). Additionally, the Group has the right to nominate for election either Mr. Silver or Mr. Horrigan as a member of our Board of Directors when the Group no longer holds at least one-half of the number of shares of our common stock held by it in the aggregate on February 14, 1997 but beneficially owns at least 5 percent of our common stock. The Stockholders Agreement continues until the death or disability of both of Messrs. Silver and Horrigan. The provisions of the Stockholders Agreement could have the effect of delaying, deferring or preventing a change of control of Silgan Holdings Inc. and preventing our stockholders from receiving a premium for their shares of our common stock in any proposed acquisition of Silgan Holdings Inc.
ANTI-TAKEOVER PROVISIONS IN OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND OUR AMENDED AND RESTATED BY-LAWS COULD HAVE THE EFFECT OF DISCOURAGING, DELAYING OR PREVENTING A MERGER OR ACQUISITION. ANY OF THESE EFFECTS COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
Provisions of our amended and restated certificate of incorporation and our amended and restated by-laws may have the effect of delaying or preventing transactions involving a change of control of Silgan Holdings Inc., including transactions in which stockholders might otherwise receive a substantial premium for their shares over then current market prices, and may limit the ability of stockholders to approve transactions that they may deem to be in their best interests.
In particular, our amended and restated certificate of incorporation provides that:
the Board of Directors is authorized to issue one or more classes of preferred stock having such designations, rights and preferences as may be determined by the Board;
the Board of Directors is divided into three classes, and each year approximately one-third of the directors are elected for a term of three years;
the Board of Directors is fixed at seven members; and
action taken by the holders of common stock must be taken at a meeting and may not be taken by consent in writing.
Additionally, our amended and restated by-laws provide that a special meeting of the stockholders may only be called by either of our Co-Chairmen of the Board on their own initiative or at the request of a majority of the Board of Directors, and may not be called by the holders of common stock.
UPON THE OCCURRENCE OF CERTAIN CHANGE OF CONTROL EVENTS, WE MAY NOT BE ABLE TO SATISFY ALL OF OUR OBLIGATIONS UNDER OUR CREDIT AGREEMENT AND INDENTURES.
Under our Credit Agreement, the occurrence of a change of control (as defined in our Credit Agreement) constitutes an event of default, permitting, among other things, the acceleration of amounts owed thereunder. Additionally, upon the occurrence of a change of control as defined in the indentures governing the 5% Notes and the 5½% Notes, we must make an offer to repurchase the 5% Notes and the 5½% Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued interest to the date of purchase. We may not have sufficient funds or be able to obtain sufficient financing to meet such obligations under our Credit Agreement and such indentures.

ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.


21


ITEM 2. PROPERTIES.
Our principal executive offices are located at 4 Landmark Square, Suite 400, Stamford, Connecticut 06901. The administrative headquarters and principal places of business for our metal container business are located at 21800 Oxnard Street, Woodland Hills, California 91367 and Landskrongasse 5/1, 1010 Vienna, Austria; the administrative headquarters and principal places of business for our closures business are located at 1140 31st Street, Downers Grove, Illinois 60515 and North 88, Riesstrasse 16, 80992 Munich, Germany; and the administrative headquarters and principal place of business for our plastic container business is located at 14515 N. Outer Forty, Chesterfield, Missouri 63017. We lease all of these offices.
We own and lease properties for use in the ordinary course of business. The properties consist primarily of 47 operating facilities for the metal container business, 19 operating facilities for the closures business and 23 operating facilities for the plastic container business. We own 49 of these facilities and lease 40. The leases expire at various times through 2030. Some of these leases provide renewal options as well as various purchase options.
Below is a list of our operating facilities, including attached warehouses, as of February 1, 2016 for our metal container business:
Location
Approximate Building Area
(square feet)
Antioch, CA
144,500

 
(leased)
Modesto, CA
37,800

 
(leased)
Modesto, CA
128,000

 
(leased)
Modesto, CA
150,000

 
(leased)
Riverbank, CA
167,000

 
 
Sacramento, CA
217,600

 
(leased)
Hoopeston, IL
323,600

 
 
Rochelle, IL
295,900

 
(75,000 leased)
Waukegan, IL
74,200

 
(leased)
Hammond, IN
158,000

 
(leased)
LaPorte, IN
144,000

 
(leased)
Ft. Dodge, IA
232,400

 
(leased)
Ft. Madison, IA
150,700

 
(56,000 leased)
Savage, MN
160,000

 
 
Mt. Vernon, MO
100,000

 
 
St. Joseph, MO
206,500

 
 
Edison, NJ
265,500

 
 
Lyons, NY
149,700

 
 
Maxton, NC
225,700

 
(leased)
Napoleon, OH
302,100

 
(leased)
Lancaster, SC
58,100

 
 
Trenton, TN
96,300

 
(leased)
Paris, TX
266,300

 
(leased)
Toppenish, WA
217,700

 
 
Menomonee Falls, WI
116,000

 
 
Menomonie, WI
129,400

 
(leased)
Oconomowoc, WI
114,600

 
 
Plover, WI
86,800

 
(leased)
Waupun, WI
212,000

 
 
Las Piedras, Puerto Rico
26,800

 
(leased)
Mitterdorf im Murtzal, Austria
192,000

 
 
Grodno, Belarus
72,000

 
(leased)
Leipzig, Germany
190,000

 
 
Meissen, Germany
139,000

 
 
Agios Ionnis Renti, Greece
309,000

 
 
Skydra, Greece
200,000

 
 

22


Location
Approximate Building Area
(square feet)
Wadi al Rayan, Jordan
215,000

 
 
Bitola, Macedonia
120,000

 
 
Malomice, Poland
87,000

 
 
Szprotawa, Poland
82,000

 
 
Tczew, Poland
116,000

 
 
Enem, Adjigeva, Russia
99,000

 
 
Stupino, Russia
77,000

 
 
Nove-Mesto nad Vahom, Slovakia
403,000

 
(119,000 leased)
Ljubljana-Zalog, Slovenia
145,000

 
 
Izmir, Turkey
170,000

 
 
Brovary, Ukraine
80,000

 
 
 
 
 
 

Below is a list of our operating facilities, including attached warehouses, as of February 1, 2016 for our closures business:
Location
Approximate Building Area
(square feet)
Tolleson, AZ
115,000

 
(leased)
Athens, GA
222,200

 
(leased)
Champaign, IL
254,600

 
(leased)
Evansville, IN
186,000

 
 
Richmond, IN
462,700

 
 
New Castle, PA
80,300

 
 
West Hazleton, PA
151,500

 
(leased)
Kingsport, TN
100,000

 
 
Pocos de Caldas, Brazil
39,800

 
 
Shanghai, China
49,400

 
 
Louny, Czech Republic
56,800

 
(leased)
Hannover, Germany
549,000

 
(leased)
Battipaglia, Italy
156,500

 
 
Guadalajara, Mexico
80,000

 
(leased)
Santa Rosa City, Philippines
87,800

 
(leased)
Niepolomice, Poland
170,100

 
 
Niepolomice, Poland
73,700

 
 
Torello, Spain
71,900

 
(leased)
Doncaster, United Kingdom
80,000

 
(leased)

23


Below is a list of our operating facilities, including attached warehouses, as of February 1, 2016 for our plastic container business:
Location
Approximate Building Area
(square feet)
Deep River, CT
146,000

 
 
Monroe, GA
117,000

 
 
Flora, IL
56,400

 
 
Woodstock, IL
129,800

 
(leased)
Ligonier, IN
469,000

 
(276,000 leased)
Seymour, IN
406,000

 
 
Franklin, KY
122,000

 
(leased)
Cape Girardeau, MO
119,600

 
(leased)
Union, MO
195,000

 
 
Penn Yan, NY
103,000

 
 
Ottawa, OH
447,000

 
(180,000 leased)
Langhorne, PA
172,600

 
(leased)
North East, PA
135,000

 
(leased)
Houston, TX
335,200

 
 
Triadelphia, WV
168,400

 
 
Edmonton, Alberta
55,600

 
(leased)
Richmond, British Columbia
49,200

 
(leased)
Scarborough, Ontario
117,000

 
 
Woodbridge, Ontario
147,500

 
(leased)
Woodbridge, Ontario
97,600

 
(leased)
Lachine, Quebec
113,300

 
(leased)
Lachine, Quebec
79,400

 
(leased)
Montreal, Quebec
43,500

 
(leased)
We lease our research facilities in Oconomowoc, Wisconsin, Downers Grove, Illinois, Hannover, Germany and Norcross, Georgia. We also own and lease other warehouse facilities that are detached from our manufacturing facilities. Additionally, we may sublease other facilities that we previously operated.
We believe that our plants, warehouses and other facilities are in good operating condition, adequately maintained, and suitable to meet our present needs and future plans. We believe that we have sufficient capacity to satisfy the demand for our products in the foreseeable future. To the extent that we need additional capacity, we believe that we can convert certain facilities to continuous operation or make the appropriate capital expenditures to increase capacity.

ITEM 3. LEGAL PROCEEDINGS.
We are a party to routine 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.
A competition authority in Germany commenced an antitrust investigation involving the industry association for metal packaging in Germany and its members, including our metal container and closures subsidiaries in Germany. Given the early stage of the investigation, we cannot reasonably assess what actions may result from the investigation or estimate what costs we may incur as a result of the investigation.

ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.


24


PART II
 
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is quoted on the Nasdaq Global Select Market System under the symbol SLGN. As of January 31, 2016, we had 43 holders of record of our common stock.
We began paying quarterly cash dividends on our common stock in 2004, and have increased the amount of the quarterly cash dividend payable on our common stock each year since then. In February 2015, our Board of Directors increased the amount of our quarterly cash dividend payable on our common stock from $0.15 per share to $0.16 per share. The payment of future dividends is at the discretion of our Board of Directors and will be dependent upon our consolidated results of operations and financial condition, federal tax policies and other factors deemed relevant by our Board of Directors.
The table below sets forth the high and low closing sales prices of our common stock as reported by the Nasdaq Global Select Market System for the periods indicated below and the cash dividends paid per share of our common stock in the periods indicated below.
 
  
Closing Sales Prices
 
Cash Dividends
Per Share
  
High
 
Low
 
2015
 
 
 
 
 
First Quarter
$58.47
 
$51.41
 
$0.16
Second Quarter
58.74
 
52.76
 
0.16
Third Quarter
55.61
 
50.75
 
0.16
Fourth Quarter
55.82
 
49.97
 
0.16
  
Closing Sales Prices
 
Cash Dividends
Per Share
  
High
 
Low
 
2014
 
 
 
 
 
First Quarter
$49.52
 
$44.55
 
$0.15
Second Quarter
50.82
 
48.66
 
0.15
Third Quarter
51.54
 
47.00
 
0.15
Fourth Quarter
54.89
 
46.52
 
0.15
ISSUER PURCHASES OF EQUITY SECURITIES
On February 28, 2014, our Board of Directors authorized the repurchase by us of up to $300.0 million of our common stock, inclusive of prior authorizations, by various means from time to time through and including December 31, 2019. Pursuant to this authorization, we completed a "modified Dutch auction" tender offer on March 17, 2015 pursuant to which we repurchased 2,766,354 shares of our common stock from our stockholders at a price of $58.50 per share, for a total purchase price of $161.8 million, exclusive of $0.7 million of fees and expenses. We also repurchased an aggregate of 139,421 shares of our common stock through open market purchases in the second quarter of 2015 at an average price per share of $54.71, for a total purchase price of $7.6 million. We did not repurchase any of our equity securities during the third and fourth quarters of 2015. Accordingly, at December 31, 2015, we had approximately $106.0 million remaining under this authorization for the repurchase of our common stock.

 

25


ITEM 6. SELECTED FINANCIAL DATA.
In the table that follows, we provide you with selected financial data of Silgan Holdings Inc. We have derived this data from our consolidated financial statements for the five years ended December 31, 2015. Our consolidated financial statements for the five years ended December 31, 2015 have been audited by Ernst & Young LLP, our independent registered public accounting firm.
You should read this selected financial data along with the consolidated financial statements and accompanying notes included elsewhere in this Annual Report, as well as the section of this Annual Report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Selected Financial Data
 
 
Year Ended December 31,
 
2015
 
2014(a)
 
2013(a)
 
2012(a)
 
2011(a)
 
(Dollars in millions, except per share data)
Operating Data:
 
 
 
 
 
 
 
 
 
Net sales
$
3,764.0

 
$
3,911.8

 
$
3,708.5

 
$
3,588.3

 
$
3,509.2

Cost of goods sold
3,209.9

 
3,312.0

 
3,161.3

 
3,070.7

 
2,990.6

Gross profit
554.1

 
599.8

 
547.2

 
517.6

 
518.6

Selling, general and administrative
expenses (b)
219.9

 
224.4

 
211.0

 
183.4

 
156.8

Rationalization charges
14.4

 
14.5

 
12.0

 
8.7

 
7.7

Income from operations
319.8

 
360.9

 
324.2

 
325.5

 
354.1

Interest and other debt expense before loss on early extinguishment of debt
66.9

 
74.8

 
67.4

 
63.0

 
63.0

Loss on early extinguishment of debt

 
1.5

 
2.1

 
38.7

 
1.0

Interest and other debt expense
66.9

 
76.3

 
69.5

 
101.7

 
64.0

Income before income taxes
252.9

 
284.6

 
254.7

 
223.8

 
290.1

Provision for income taxes
80.5

 
102.2

 
69.3

 
72.5

 
96.9

Net income
$
172.4

 
$
182.4

 
$
185.4

 
$
151.3

 
$
193.2

Per Share Data: 
 
 
 
 
 
 
 
 
 
Basic net income per share
$
2.83

 
$
2.88

 
$
2.89

 
$
2.18

 
$
2.76

Diluted net income per share
$
2.81

 
$
2.86

 
$
2.87

 
$
2.17

 
$
2.75

Dividends per share
$
0.64

 
$
0.60

 
$
0.56

 
$
0.48

 
$
0.44

Selected Segment Data:
 
 
 
 
 
 
 
 
 
Net sales:
 
 
 
 
 
 
 
 
 
Metal containers
$
2,365.3

 
$
2,369.7

 
$
2,341.4

 
$
2,293.7

 
$
2,211.5

Closures
805.0

 
882.9

 
720.1

 
680.1

 
687.8

Plastic containers
593.7

 
659.2

 
647.0

 
614.5

 
609.9

Income from operations:
 
 
 
 
 
 
 
 
 
Metal containers (c)
236.4

 
248.7

 
236.3

 
231.5

 
256.3

Closures (d)
91.8

 
75.6

 
63.0

 
73.1

 
75.9

Plastic containers (e)
7.8

 
51.5

 
38.6

 
30.8

 
12.6


26


Selected Financial Data
 
Year Ended December 31,
 
2015
 
2014(a)
 
2013(a)
 
2012(a)
 
2011(a)
 
(Dollars in millions, except per share data)
Other Data:
 
 
 
 
 
 
 
 
 
Capital expenditures
$
237.3

 
$
140.5

 
$
103.1

 
$
119.2

 
$
173.0

Depreciation and amortization (f)
142.2

 
148.1

 
167.6

 
165.0

 
158.8

Net cash provided by operating activities
335.4

 
345.0

 
350.7

 
351.7

 
359.6

Net cash used in investing activities
(237.1
)
 
(156.9
)
 
(376.4
)
 
(436.8
)
 
(459.8
)
Net cash (used in) provided by financing activities
(221.0
)
 
(126.0
)
 
(279.4
)
 
153.6

 
322.1

Balance Sheet Data (at end of period):
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
99.9

 
$
222.6

 
$
160.5

 
$
465.6

 
$
397.1

Goodwill
612.8

 
630.3

 
651.0

 
510.8

 
389.9

Total assets (g) (h)
3,192.7

 
3,274.1

 
3,282.5

 
3,249.9

 
2,953.6

Total debt (g)
1,513.5

 
1,584.1

 
1,686.4

 
1,656.4

 
1,365.4

Stockholders’ equity
639.2

 
710.0

 
713.8

 
753.6

 
658.0

Notes to Selected Financial Data
 
(a)
In September 2014, we acquired the metal container assets of Van Can. In October 2013, we acquired Portola. In 2013, we also acquired Amcor Australia Metal Closures and Tecnocap U.S. Metal Closures. In August 2012, we acquired PFC, the plastic food container operations of Rexam PLC. In 2012, we also acquired Öntaş Öner Teneke Ambalaj Sanayi ve Ticaret A.S., a metal container and closure manufacturer in Turkey. In 2011, we acquired the metal container operations of Vogel & Noot Holding AG in Central and Eastern Europe, the twist-off metal closures operations of DGS S.A. in Poland and Purina Steel Can, Nestlé's steel container self-manufacturing assets, in the United States.
(b)
Selling, general and administrative expenses include income of $25.2 million in 2011 for proceeds of $39.5 million received as a result of the termination of the merger agreement with Graham Packaging Company Inc., net of costs associated with certain corporate development activities, and costs attributable to announced acquisitions of $1.5 million in each of 2013 and 2012.
(c)
Income from operations of the metal container business includes rationalization (credits) charges of $(0.4) million, $2.5 million, $2.5 million and $1.4 million in 2014, 2013, 2012 and 2011, respectively. Income from operations of the metal container business also includes new plant start-up costs of $0.8 million and $6.4 million in 2013 and 2012, respectively, and a charge for the resolution of a past product liability dispute of $3.3 million in 2011.
(d)
Income from operations of the closures business includes rationalization charges of $1.7 million, $12.2 million, $5.6 million, $2.9 million and $1.8 million in 2015, 2014, 2013, 2012 and 2011, respectively, and (loss) income from operations in Venezuela of $(3.1) million, $(2.9) million, $5.1 million and $1.6 million in 2014, 2013, 2012 and 2011, respectively. The loss from operations in Venezuela in 2013 included a charge of $3.0 million for the remeasurement of net assets due to a currency devaluation.
(e)
Income from operations of the plastic container business includes rationalization charges of $12.7 million, $2.7 million, $3.9 million, $3.3 million and $4.0 million in 2015, 2014, 2013, 2012 and 2011, respectively.
(f)
Depreciation and amortization excludes amortization of debt discount and issuance costs. In 2014, we increased the estimated useful lives of certain production equipment by an average of approximately 5 years to a maximum depreciable life of 20 years. You should also read “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Change in Depreciable Lives” included elsewhere in this Annual Report for more information.

27



(g)
In 2015, we retrospectively adopted new accounting guidance regarding the classification of certain debt issuance costs. As a result, each of total assets and total debt were decreased by $14.9 million, $17.4 million, $14.9 million and $10.8 million in 2014, 2013, 2012 and 2011, respectively. You should also read Note 1 to our Consolidated Financial Statements for the year ended December 31, 2015 included elsewhere in this Annual Report for more information.
(h)
In 2015, we retrospectively adopted new accounting guidance regarding the classification of deferred taxes. As a result, each of total assets and total liabilities were decreased by $14.9 million, $21.1 million, $28.8 million and $14.6 million in 2014, 2013, 2012 and 2011, respectively. You should also read Note 1 to our Consolidated Financial Statements for the year ended December 31, 2015 included elsewhere in this Annual Report for more information.

28


ITEM 7. MANAGEMENTS 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, 2015. 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.
GENERAL
We are a leading manufacturer of rigid packaging for shelf-stable food and other consumer goods products. We currently produce steel and aluminum containers for human and pet food and general line products; metal, composite and plastic closures for food and beverage products; and custom designed plastic containers and closures for personal care, food, health care, pharmaceutical, household and industrial chemical, pet care, agricultural, automotive and marine chemical products. We are 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 for the year ended December 31, 2015 of slightly more than half of the market in the United States, a leading worldwide manufacturer of metal, composite and plastic closures for food and beverage products 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, 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.
SALES GROWTH
We have increased net sales and market share in our metal container, closures and plastic container businesses through both acquisitions and internal growth. As a result, we have expanded and diversified our customer base, geographic presence and product lines.
We are a leading manufacturer 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 29 years, the metal food container market 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 and Purina Steel Can reflect this trend. We estimate that approximately six percent of the market for metal food containers in the United States is still served by self-manufacturers. In addition, the metal food container market in North America has been relatively flat during this period, despite losing market share as a result of more dining out, fresh produce and competing materials. However, we increased our share of the market for metal food containers in the United States primarily through acquisitions and growth with existing customers, and we have enhanced our business by focusing on providing customers with high levels of quality and service and value-added features such as our Quick Top® easy-open ends, shaped metal food containers and alternative color offerings for metal food containers. We anticipate that the market will be relatively flat in the future, but will continue to increase in areas of consumer convenience products such as single-serve sizes and easy-open ends. In 2015, approximately 60 percent of our metal food containers sold had an easy-open end. We expect to further enhance our metal container business through our Can Vision 2020SM program, which is intended to further the competitive advantages of metal packaging for food. In 2015, we commenced construction of a new metal food container manufacturing facility in the United States to better optimize the logistical footprint of our metal container business in North America, allowing us to further reduce costs of our metal container business. The construction of this facility is expected to be completed in the first half of 2016.
With our acquisitions of our closures operations in North America, Europe, Asia and South America, we established ourselves as a leading worldwide manufacturer of metal, composite and plastic closures for food and beverage products, with leadership positions in the North American and European markets. In 2013, we expanded the geographic scope, product offerings and scale of our closures business with the acquisitions of Portola, Amcor Australia Metal Closures and Tecnocap U.S. Metal Closures. We may pursue further consolidation opportunities in the closures markets in which we operate. Additionally, we expect to continue to generate internal growth in our closures business, particularly in plastic closures.

29


We have improved the market position of our plastic container business since 1987, with net sales increasing sevenfold to $593.7 million in 2015. We achieved this improved market position primarily through strategic acquisitions as well as through internal growth. In 2012, we completed the strategic acquisition of PFC, broadening our product offerings for shelf-stable food products to include plastic thermoformed barrier and non-barrier bowls and trays. As part of the acquisition of Portola in 2013, we acquired three plastic container manufacturing facilities in Canada, further expanding the geographic scope and product offerings of our plastic container business. In 2015, we commenced construction of two new plastic container manufacturing facilities in the United States, including a near-site facility to a major customer and another facility to meet the growing needs of our customers and allow us to further reduce costs of our plastic container business. The construction of these facilities is expected to be completed in the first half of 2016. The plastic container market of the consumer goods packaging industry continues to be highly fragmented, with growth rates in excess of population expansion due to substitution of plastic for other materials. 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 intend to pursue further acquisition opportunities in markets where we believe that we can successfully apply our acquisition and value-added operating expertise and strategy.
OPERATING PERFORMANCE
We operate in a competitive industry where it is necessary to realize cost reduction opportunities to offset continued competitive pricing pressure. 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. From 2011, we have closed two metal container manufacturing facilities, two closure manufacturing facilities and five plastic container manufacturing facilities in connection with our continuing efforts to streamline our plant operations, reduce operating costs and better match supply with geographic demand. In addition, we have announced the shutdown of two metal container manufacturing facilities and two plastic container manufacturing facilities that we expect to close during 2016.
We have also invested substantial capital in the past several years for new market opportunities and value-added products such as Quick Top® easy-open ends for metal food containers, shaped metal food containers and alternative color offerings for metal food containers. In addition, we have begun to make investments for our Can Vision 2020SM program which are intended to enhance the competitive advantages of metal packaging for food. In 2015, we initiated optimization plans in each of our businesses that were designed to reduce manufacturing and logistical costs and provide productivity improvements and manufacturing efficiencies, thereby resulting in a lower cost manufacturing network for our businesses and strengthening the competitive position of each of our businesses in their respective markets.  The optimization plans include the construction of a new metal food container manufacturing facility and two new plastic container manufacturing facilities, the relocation of various equipment lines to facilities where we can better serve our customers and the rationalization of several existing manufacturing facilities.  The three new manufacturing facilities are strategically located to meet the unique needs of our customers. In addition to optimizing freight and logistical costs, we expect that these three new facilities will allow us to further reduce costs and rationalize our manufacturing footprint. Our closures business successfully completed the execution of its optimization plan in 2015. Our metal and plastic container businesses are continuing the implementation of their optimization plans, including construction of the new manufacturing facilities.
Historically, we have been successful in renewing our multi-year supply arrangements with our customers. We estimate that in 2016 approximately 90 percent of our projected North American metal container sales, a majority of our projected closures sales in the United States and a majority of our projected plastic container 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. Under our supply arrangements in the United States, we were able to adjust prices to pass through changes in metal costs. For our non-contract domestic customers, we have also generally increased prices to pass through higher metal costs. In Europe, our businesses have had long-term relationships with many of their customers and we have generally increased prices to pass through higher metal costs, although, as is common practice, many supply arrangements are negotiated on a year-by-year basis. Resin prices have also fluctuated significantly in the past few years, and we have been able to pass through changes in resin costs in accordance with our supply arrangements.

30


Our metal container business’ sales and income from operations are 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 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 container 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 longer period of time, we may use our cash flow to repay debt, repurchase shares of our common stock or increase dividends to our shareholders or for other permitted purposes. In 2013, we used cash on hand, revolving loan borrowings under our 2011 Credit Facility and other foreign bank revolving loans to fund repurchases of our common stock for $267.6 million (which included $250.0 million of our common stock purchased pursuant to a "modified Dutch auction" tender offer completed in February 2013), the purchase price for our acquisitions of Portola, Amcor Australia Metal Closures and Tecnocap U.S. Metal Closures and the repayment of $300.9 million of term loans under our 2011 Credit Facility. In addition, we issued $300 million of the 5½% Notes in September 2013, the net proceeds of which were used to repay revolving loans under our 2011 Credit Facility. In January 2014, we refinanced our 2011 Credit Facility with our Credit Agreement. Our Credit Agreement refinanced all outstanding amounts under our 2011 Credit Facility and provides us with a $985.6 million multicurrency revolving loan facility and a Cdn $15.0 million revolving loan facility for working capital requirements and other strategic initiatives. In September 2014, we funded the purchase price for Van Can with cash on hand. In 2015 we used cash on hand and revolving loan borrowings under our Credit Agreement to fund repurchases of our common stock for $170.1 million (which included $161.8 million of our common stock purchased pursuant to a "modified Dutch auction" tender offer completed in March 2015).
To the extent we utilize debt for acquisitions or other permitted purposes in future periods, our interest expense may increase. Further, since the revolving loan and term loan borrowings under our Credit Agreement bear interest at floating rates, our interest expense is sensitive to changes in prevailing rates of interest and, accordingly, our interest expense may vary from period to period. After taking into account interest rate swap agreements that we entered into to mitigate the effect of interest rate fluctuations, at December 31, 2015 we had $609.1 million of indebtedness, or approximately 40 percent of our total outstanding indebtedness, which bore interest at floating rates. You should read Note 9 to our Consolidated Financial Statements for the year ended December 31, 2015 included elsewhere in this Annual Report for information regarding our interest rate swap agreements.
In light of our strategy to use leverage to support our growth and optimize shareholder returns, we have incurred and will continue to incur significant interest expense. For 2015, 2014 and 2013, our aggregate interest and other debt expense before loss on early extinguishment of debt as a percentage of our income from operations was 20.9 percent, 20.7 percent and 20.8 percent, respectively.

31


RESULTS OF OPERATIONS
The following table sets forth certain income statement data expressed as a percentage of net sales for each of the periods presented. You should read this table in conjunction with our Consolidated Financial Statements for the year ended December 31, 2015 and the accompanying notes included elsewhere in this Annual Report.
 
 
Year Ended December 31,
 
2015
 
2014
 
2013
Operating Data:
 
 
 
 
 
Net sales:
 
 
 
 
 
Metal containers
62.8
%
 
60.6
%
 
63.1
%
Closures
21.4

 
22.6

 
19.4

Plastic containers
15.8

 
16.8

 
17.5

Consolidated
100.0

 
100.0

 
100.0

Cost of goods sold
85.3

 
84.7

 
85.3

Gross profit
14.7

 
15.3

 
14.7

Selling, general and administrative expenses
5.8

 
5.7

 
5.7

Rationalization charges
0.4

 
0.4

 
0.3

Income from operations
8.5

 
9.2

 
8.7

Interest and other debt expense
1.8

 
1.9

 
1.8

Income before income taxes
6.7

 
7.3

 
6.9

Provision for income taxes
2.1

 
2.6

 
1.9

Net income
4.6
%
 
4.7
%
 
5.0
%
Summary results for our business segments for the years ended December 31, 2015, 2014 and 2013 are provided below.
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(Dollars in millions)
Net sales:
 
 
 
 
 
Metal containers
$
2,365.3

 
$
2,369.7

 
$
2,341.4

Closures
805.0

 
882.9

 
720.1

Plastic containers
593.7

 
659.2

 
647.0

Consolidated
$
3,764.0

 
$
3,911.8

 
$
3,708.5

Income from operations:
 
 
 
 
 
Metal containers(1)
$
236.4

 
$
248.7

 
$
236.3

Closures(2)
91.8

 
75.6

 
63.0

Plastic containers(3)
7.8

 
51.5

 
38.6

Corporate(4)
(16.2
)
 
(14.9
)
 
(13.7
)
Consolidated
$
319.8

 
$
360.9

 
$
324.2

______________________
(1)
Includes a rationalization credit of $0.4 million in 2014 and rationalization charges of $2.5 million and new plant start-up costs of $0.8 million in 2013.
(2)
Includes rationalization charges of $1.7 million, $12.2 million and $5.6 million in 2015, 2014 and 2013,respectively, and losses from operations in Venezuela of $3.1 million and $2.9 million in 2014 and 2013, respectively. The loss from operations in Venezuela in 2013 included a charge of $3.0 million for the remeasurement of net assets due to a currency devaluation.
(3)
Includes rationalization charges of $12.7 million, $2.7 million and $3.9 million in 2015, 2014 and 2013, respectively.
(4)
Includes costs attributable to announced acquisitions of $1.5 million in 2013.



32


YEAR ENDED DECEMBER 31, 2015 COMPARED WITH YEAR ENDED DECEMBER 31, 2014
Overview. Consolidated net sales were $3.76 billion in 2015, representing a 3.8 percent decrease as compared to 2014 primarily due to the impact of unfavorable foreign currency translation of approximately $138 million, the pass through of lower raw material costs in each of our businesses, lower volumes and the unfavorable financial impact from recent longer-term contract renewals in the plastic container business and the cessation of operations in Venezuela in the closures business at the end of 2014. These decreases were partially offset by higher unit volumes in the metal container and closures businesses. Income from operations for 2015 decreased by $41.1 million, or 11.4 percent, as compared to 2014 primarily as a result of higher manufacturing costs due to logistical challenges and a less favorable mix of products sold in the metal container business, significant incremental costs and inefficiencies related to the footprint optimization program in the plastic container business, the unfavorable financial impact from recent longer-term customer contract renewals and lower volumes in the plastic container business, the impact of unfavorable foreign currency translation, a customer reimbursement for certain historical project costs in the prior year in the plastic container business, start-up costs associated with the new manufacturing facilities and the impact from a reduction in inventories in 2015 as compared to an increase in inventories in 2014 in the closures business. These decreases were partially offset by higher unit volumes in the metal container and closures businesses, better operating performance in the closures business, the favorable impact from the lagged pass through of lower resin costs in the closures and plastic container businesses, an inventory build in the metal container business and operational losses in Venezuela in the closures business incurred in the prior year. Results for 2015 and 2014 included rationalization charges of $14.4 million and $14.5 million, respectively. Results for 2014 included a loss from operations in Venezuela of $3.1 million and a loss on early extinguishment of debt of $1.5 million. Net income in 2015 was $172.4 million as compared to $182.4 million in 2014.
Net Sales. The $147.8 million decrease in consolidated net sales in 2015 as compared to 2014 was due to lower net sales across all of our businesses.
Net sales for the metal container business decreased $4.4 million, or 0.2 percent, in 2015 as compared to 2014. This decrease was primarily a result of the impact of unfavorable foreign currency translation of approximately $56 million and the pass through of lower raw material costs, partially offset by higher unit volumes. Unit volumes increased approximately 5 percent versus the prior year principally due to volumes of smaller size cans associated with the Van Can operations acquired in September 2014 and continued growth for pet food products.
Net sales for the closures business in 2015 decreased $77.9 million, or 8.8 percent, as compared to 2014. This decrease was primarily the result of the impact of unfavorable foreign currency translation of approximately $63 million, the pass through of lower raw material costs and the cessation of operations in Venezuela at the end of 2014, partially offset by higher unit volumes of approximately 2 percent.
Net sales for the plastic container business in 2015 decreased $65.5 million, or 9.9 percent, as compared to 2014. This decrease was primarily due to the impact of unfavorable foreign currency translation of approximately $19 million, the pass through of lower raw material costs, lower volumes of approximately 3 percent principally due to weaker demand in certain markets and the unfavorable financial impact from recent longer-term customer contract renewals.
Gross Profit. Gross profit margin decreased 0.6 percentage points to 14.7 percent in 2015 as compared to 15.3 percent in 2014 for the reasons discussed below in “Income from Operations.”
Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of consolidated net sales increased 0.1 percentage points to 5.8 percent for 2015 as compared to 5.7 percent in 2014.
Income from Operations. Income from operations for 2015 decreased by $41.1 million as compared to 2014, and operating margin decreased to 8.5 percent from 9.2 percent over the same periods. These decreases were principally due to lower income from operations in the metal and plastic container businesses, partially offset by higher income from operations in the closures business. Income from operations in 2015 and 2014 included rationalization charges of $14.4 million and $14.5 million, respectively.
Income from operations of the metal container business for 2015 decreased $12.3 million as compared to 2014, and operating margin decreased to 10.0 percent from 10.5 percent over the same periods. The decrease in income from operations was primarily due to higher manufacturing costs as a result of logistical challenges from

33


changes in customer demand patterns, a less favorable mix of products sold and the impact of unfavorable foreign currency translation, partially offset by higher unit volumes sold and the impact from an inventory build in anticipation of optimizing production capacities in 2016.
Income from operations of the closures business for 2015 increased $16.2 million as compared to 2014, and operating margin increased to 11.4 percent from 8.6 percent over the same periods. The increase in income from operations was primarily due to lower rationalization charges, higher unit volumes, better operating performance largely as a result of the benefits from plant optimization programs, operational losses of $3.1 million in Venezuela incurred in the prior year and the favorable impact from the lagged pass through of lower resin costs as compared to the unfavorable impact from resin in 2014. These increases were partially offset by the impact of unfavorable foreign currency translation and a reduction in inventories in 2015 as compared to an increase in inventories in 2014. Rationalization charges were $1.7 million and $12.2 million in 2015 and 2014, respectively. Rationalization charges in 2014 were primarily related to the shutdown of the manufacturing facility in Venezuela and headcount reductions in Europe.
Income from operations of the plastic container business for 2015 decreased $43.7 million as compared to 2014, and operating margin decreased to 1.3 percent from 7.8 percent over the same periods. The decrease in income from operations was primarily attributable to the significant incremental costs and inefficiencies incurred to service customers during the footprint optimization program, the unfavorable financial impact from recent longer-term customer contract renewals, higher rationalization charges, lower volumes, a customer reimbursement for historical project costs in the prior year, the impact of unfavorable foreign currency translation and start-up costs associated with the new manufacturing facilities, partially offset by the favorable impact from the lagged pass through of lower resin costs. Rationalization charges were $12.7 million and $2.7 million in 2015 and 2014, respectively. Rationalization charges in 2015 were primarily related to the announced shutdown of the Woodstock, Illinois and Cape Girardeau, Missouri manufacturing facilities.
Interest and Other Debt Expense. Interest and other debt expense before loss on early extinguishment of debt for 2015 decreased $7.9 million as compared to 2014 primarily due to lower weighted average interest rates and the impact from favorable foreign currency translation. The loss on early extinguishment of debt of $1.5 million in 2014 was a result of the refinancing of our 2011 Credit Facility in January 2014.
Provision for Income Taxes. The effective tax rate for 2015 was 31.8 percent, as compared to 35.9 percent for 2014. The effective tax rate for 2015 was favorably impacted primarily by higher income in more favorable tax jurisdictions and the ability to fully recognize benefits in the current year period from the recent legislative extension of certain U.S. tax provisions. The effective tax rate for 2014 was unfavorably impacted primarily by the tax effect from the shutdown of the Venezuela manufacturing facility, partially offset by the favorable impact from the realization of certain foreign tax credit benefits.
YEAR ENDED DECEMBER 31, 2014 COMPARED WITH YEAR ENDED DECEMBER 31, 2013
Overview. Consolidated net sales were $3.91 billion in 2014, representing a 5.5 percent increase as compared to 2013 primarily due to the inclusion of net sales from Portola and the Van Can operations, the pass through of higher raw material costs and a favorable mix of products sold in the plastic container business, partially offset by the financial impact of customer contract renewals and extensions in the metal container business and the impact of unfavorable foreign currency translation. Income from operations for 2014 increased by $36.7 million, or 11.3 percent, as compared to 2013 primarily as a result of lower manufacturing and depreciation expenses, the inclusion of Portola, better operating performance in the metal container business in Europe, a customer reimbursement for certain historical project costs in the plastic container business and a more favorable mix of products sold in the plastic container business. These increases were partially offset by the financial impact from customer contract renewals and extensions in the metal container business and higher rationalization charges. Results for 2014 and 2013 included rationalization charges of $14.5 million and $12.0 million, respectively, a loss from operations in Venezuela of $3.1 million and $2.9 million, respectively, and a loss on early extinguishment of debt of $1.5 million and $2.1 million, respectively. Net income in 2014 was $182.4 million as compared to $185.4 million in 2013.
Net Sales. The $203.3 million increase in consolidated net sales in 2014 as compared to 2013 was due to higher net sales across all of our businesses.
Net sales for the metal container business increased $28.3 million, or 1.2 percent, in 2014 as compared to the same period in 2013. This increase was primarily a result of the impact of the pass through of higher raw material

34


and other manufacturing costs, partially offset by the financial impact from a large number of significantly longer-term customer contract renewals and extensions. Unit volumes were relatively flat versus the prior year as a strong European fruit and vegetable pack and volumes associated with the Van Can operations were offset by declines in the core vegetable and soup markets in the United States.
Net sales for the closures business in 2014 increased $162.8 million, or 22.6 percent, as compared to the same period in 2013. This increase was primarily the result of an increase in unit volumes largely due to the inclusion of net sales from Portola.
Net sales for the plastic container business in 2014 increased $12.2 million, or 1.9 percent, as compared to the same period in 2013. This increase was primarily due to the pass through of higher raw material costs and a more favorable mix of products sold, partially offset by the impact of unfavorable foreign currency translation of approximately $8 million.
Gross Profit. Gross profit margin increased 0.6 percentage points to 15.3 percent in 2014 as compared to 14.7 percent in 2013 for the reasons discussed below in “Income from Operations.”
Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of consolidated net sales remained constant at 5.7 percent in 2014 as compared to 2013. Selling, general and administrative expenses increased $13.4 million in 2014 as compared to 2013 due primarily to the inclusion of expenses from Portola. Selling, general and administrative expenses for 2013 included a $3.0 million charge for the remeasurement of net assets in Venezuela due to a currency devaluation.
Income from Operations. Income from operations for 2014 increased by $36.7 million as compared to 2013, and operating margin increased to 9.2 percent from 8.7 percent over the same periods. These increases were principally due to higher income from operations across all businesses. Income from operations in 2014 and 2013 included rationalization charges of $14.5 million and $12.0 million, respectively.
Income from operations of the metal container business for 2014 increased $12.4 million, or 5.2 percent, as compared to 2013, and operating margin increased to 10.5 percent from 10.1 percent over the same periods. The increase in income from operations was primarily due to lower manufacturing costs, including lower depreciation and amortization expense of $14.8 million due primarily to the change in asset depreciable lives, better operating performance in Europe due in part to higher unit volumes and rationalization credits in 2014 as compared to rationalization charges in 2013. These increases were partially offset by the financial impact from customer contract renewals and extensions and a decrease in unit volumes in the United States. Rationalization credits were $0.4 million in 2014, and rationalization charges were $2.5 million in 2013.
Income from operations of the closures business for 2014 increased $12.6 million, or 20.0 percent, as compared to the same period in 2013, while operating margin decreased slightly to 8.6 percent from 8.7 percent over the same periods. The increase in income from operations was primarily attributable to the inclusion of Portola, partially offset by higher rationalization charges. Rationalization charges of $12.2 million in 2014 were primarily related to the shutdown of the manufacturing facility in Venezuela and headcount reductions in Europe. Rationalization charges were $5.6 million in 2013. The loss from operations in Venezuela was $3.1 million and $2.9 million in 2014 and 2013, respectively. The loss from operations in Venezuela in 2013 included a $3.0 million charge for the remeasurement of net assets due to a currency devaluation.
Income from operations of the plastic container business for 2014 increased $12.9 million, or 33.4 percent, as compared to 2013, and operating margin increased to 7.8 percent from 6.0 percent over the same periods. These increases were primarily attributable to lower manufacturing costs, including lower depreciation and amortization expense of $10.5 million due primarily to the change in asset depreciable lives and a customer reimbursement for certain historical project costs, a more favorable mix of products sold and lower rationalization charges. Rationalization charges were $2.7 million and $3.9 million in 2014 and 2013, respectively.
Interest and Other Debt Expense. Interest and other debt expense before loss on early extinguishment of debt for 2014 increased $7.4 million as compared to 2013 primarily due to higher weighted average interest rates and higher average outstanding borrowings. The loss on early extinguishment of debt of $1.5 million in 2014 was a result of the refinancing of our 2011 Credit Facility in January 2014, while the loss on early extinguishment of debt of $2.1 million in 2013 was a result of the prepayment of $300.9 million of bank term debt under our 2011 Credit Facility.

35


Provision for Income Taxes. The effective tax rate for 2014 was 35.9 percent, as compared to 35.0 percent for 2013 which excludes a $19.7 million favorable tax adjustment primarily related to the completion of the Internal Revenue Service, or IRS, audits for periods through 2007. The effective tax rate for 2014 was unfavorably impacted by nondeductible rationalization expenses and the write-off of deferred tax assets, each resulting from the shutdown of the Venezuela manufacturing facility, partially offset by the favorable impact from the expected realization of certain foreign tax benefits.
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 primarily 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 and the funding of our seasonal working capital needs.
On January 14, 2014, we completed the refinancing of our 2011 Credit Facility by entering into our Credit Agreement. Under our Credit Agreement, we borrowed term loans and have available to us revolving loans. The term loans, or the Term Loans, provided under our Credit Agreement refinanced the term loans under our 2011 Credit Facility. The Term Loans consisted of $365 million of U.S. term loans, Cdn $70 million of Canadian term loans and €220 million of Euro term loans. The Term Loans mature on January 14, 2020, and principal on the Term Loans is required to be repaid in scheduled annual installments as provided in our Credit Agreement beginning in December 2015. The revolving loans, or the Revolving Loans, consist of a $985.6 million multicurrency revolving loan facility and a Cdn $15.0 million Canadian revolving loan facility. We may use Revolving Loans under our Credit Agreement for working capital and other general corporate purposes, including acquisitions, capital expenditures, dividends, stock repurchases and refinancing of other debt. Revolving Loans may be borrowed, repaid and reborrowed until their final maturity on January 14, 2019. Our Credit Agreement also provides us with an uncommitted multicurrency incremental loan facility for up to an additional $1.25 billion (which amount may be increased as provided in our Credit Agreement), which may be used to finance acquisitions and for other permitted purposes. All amounts owed under our 2011 Credit Facility were repaid on January 14, 2014 with proceeds from our Credit Agreement, and our 2011 Credit Facility was terminated. As a result of the refinancing of our 2011 Credit Facility, we recorded a pre-tax charge for the loss on early extinguishment of debt of $1.5 million in the first quarter of 2014.

On September 9, 2013, we issued $300 million aggregate principal amount of the 5½% Notes at 100 percent of their principal amount. Interest on the 5½% Notes is payable semi-annually in cash on February 1 and August 1 of each year beginning February 1, 2014, and the 5½% Notes mature on February 1, 2022. Net proceeds from the issuance of the 5½% Notes were used to repay outstanding bank revolving loans under our 2011 Credit Facility.
In 2015, we used cash provided by operating activities of $335.4 million and increases in outstanding checks of $19.0 million, cash and cash equivalents of $122.6 million, proceeds from the issuance of long-term debt of $7.5 million and net borrowings of revolving loans of $2.2 million to fund net capital expenditures of $236.4 million (including for the construction of the three new manufacturing facilities), repurchases of our common stock of $170.1 million, dividends paid on our common stock of $39.7 million, the repayment of long-term debt of $37.3 million (including $33.0 million of scheduled amortization payments under the Credit Agreement and the repayment of $4.3 million of foreign bank term loans), net payments for stock-based compensation issuances of $2.5 million and purchase of a business for $0.7 million.
In 2015, changes in working capital and outstanding checks used cash of $22.5 million, while changes in working capital and outstanding checks provided cash of $32.3 million in 2014. Working capital in 2015 used cash primarily as a result of an additional inventory build in 2015 principally in anticipation of planned logistical footprint optimization efforts in 2016. The increase in net capital expenditures of $97.2 million in 2015 as compared to 2014 was primarily the result of the commencement of the construction of our three new manufacturing facilities.
In 2014, we used proceeds from the issuance of long-term debt of $733.6 million and cash provided by operating activities of $345.0 million to fund the repayment of long-term debt of $754.8 million (including the refinancing of our 2011 Credit Facility), net capital expenditures of $139.2 million, dividends paid on our common stock of $38.6 million, repurchases of our common stock of $24.7 million, net repayments of revolving loans of $24.6 million, purchases of businesses for $17.7 million, net payments for stock-based compensation issuances of $8.2 million, debt issuance costs of $5.0 million related to our Credit Agreement and decreases in outstanding checks of $3.7 million and to increase cash and cash equivalents by $62.1 million.

36


In 2013, we used cash and cash equivalents of $305.1 million, proceeds from the issuance of the 5½% Notes of $300.0 million and other foreign term loans of $5.0 million, cash provided by operating activities of $350.7 million, net borrowings of revolving loans of $22.4 million and increases in outstanding checks of $13.1 million to fund the repayment of $308.3 million of long-term debt (including the repayment of $7.4 million of foreign bank term loans), the purchase price for the acquisitions of Portola, Amcor Australia Metal Closures and Tecnocap U.S. Metal Closures for an aggregate of $281.7 million, repurchases of our common stock of $267.6 million, net capital expenditures of $94.7 million, dividends paid on our common stock of $36.2 million, debt issuance costs of $5.7 million related to the 5½% Notes and net payments for stock-based compensation issuances of $2.1 million.
At December 31, 2015, we had $1,525.8 million of total consolidated indebtedness and $99.9 million of cash and cash equivalents on hand, which included $66.1 million of cash and cash equivalents on hand in foreign countries. In addition, at December 31, 2015, we had outstanding letters of credit of $22.7 million and no outstanding revolving loan borrowings under our Credit Agreement.
Under our Credit Agreement, we have available to us revolving loans consisting of $985.6 million under a multicurrency revolving loan facility and Cdn $15.0 million under a Canadian revolving loan facility. Revolving loans under our Credit Agreement may be used for working capital and other general corporate purposes, including acquisitions, capital expenditures, dividends, stock repurchases and refinancing of other debt. Revolving loans may be borrowed, repaid and reborrowed over the life of our Credit Agreement until their final maturity in January 2019. At December 31, 2015, there were no revolving loans outstanding under our Credit Agreement. After taking into account letters of credit of $22.7 million, borrowings available under the revolving loan facilities of our Credit Agreement were $962.9 million and Cdn $15.0 million on December 31, 2015. Under our Credit Agreement, we also have available to us an uncommitted multicurrency incremental loan facility in an amount of up to an additional $1.25 billion (which amount may be increased as provided in our Credit Agreement), and we may incur additional indebtedness as permitted by our Credit Agreement and our other instruments governing our indebtedness. You should also read Note 8 to our Consolidated Financial Statements for the year ended December 31, 2015 included elsewhere in this Annual Report.
Because we sell metal containers and closures used in fruit and vegetable pack processing, we have seasonal sales. As is common in the packaging 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 and were generally funded with revolving loans under our senior secured credit facility, other foreign bank loans and cash on hand. For 2016, we expect to fund our seasonal working capital requirements with revolving loans under our Credit Agreement, foreign bank loans and cash on hand. We may use the available portion of revolving loans under our 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 refinancing and repurchases of other debt.
On February 28, 2014, our Board of Directors authorized the repurchase by us of up to $300.0 million of our common stock, inclusive of prior authorizations, by various means from time to time through and including December 31, 2019. Pursuant to this authorization and previous authorizations, we repurchased a total of 139,421 shares of our common stock in 2015 at an average price per share $54.71, for a total purchase price of $7.6 million; 508,667 shares of our common stock in 2014 at an average price per share of $48.47, for a total purchase price of $24.7 million; 354,154 shares of our common stock in 2013 at an average price per share of $46.90, for a total purchase price of $16.6 million. In addition, we completed a "modified Dutch auction" tender offer on March 17, 2015 pursuant to which we repurchased 2,766,354 shares of our common stock from our stockholders at a price of $58.50 per share for a total purchase price of $161.8 million. We also completed a "modified Dutch auction" tender offer on February 8, 2013 pursuant to which we repurchased 5,524,861 shares of our common stock from our stockholders at a price of $45.25 per share, for a total purchase price of $250.0 million. Mr. Horrigan, our Non-Executive Co-Chairman of our Board of Directors, participated in the 2013 tender offer, and we purchased 515,806 shares beneficially owned by him at a price of $45.25 per share, for a total purchase price of $23.3 million, in the 2013 tender offer. At December 31, 2015, we had approximately $106.0 million remaining for the repurchase of our common stock under the February 28, 2014 authorization.

37


In addition to our operating cash needs and excluding any impact from acquisitions, we believe our cash requirements over the next few years will consist primarily of:
capital expenditures of approximately $170 million in 2016, which includes carryover amounts for the three new manufacturing facilities in the United States that we began constructing in 2015, and thereafter annual capital expenditures of approximately $120 million to $160 million which may increase as a result of projects emanating out of Can Vision 2020SM;
principal amortization payments of bank term loans under our Credit Agreement and other outstanding debt agreements of $152.4 million in 2016, $75.0 million in 2017, $68.5 million in 2018, $2.9 million in 2019, $927.0 million in 2020 and $300.0 million in 2022;
cash payments for quarterly dividends on our common stock as approved by our Board of Directors;
annual payments to satisfy employee withholding tax requirements resulting from certain restricted stock units becoming vested, which payments are dependent upon the price of our common stock at the time of vesting and the number of restricted stock units that vest, none of which is estimable at this time (payments in 2015 were not significant);
our interest requirements, including interest on revolving loans (the principal amount of which will vary depending upon seasonal requirements) and term loans under our Credit Agreement, which bear fluctuating rates of interest, the 5½% Notes and the 5% Notes;
payments of approximately $90 million to $110 million for federal, state and foreign tax liabilities in 2016, which may increase annually thereafter; and
payments for pension benefit plan contributions, which are not expected to be significant based on the fact that our domestic pension plans were more than 100 percent funded at December 31, 2015.
We believe that cash generated from operations and funds from borrowings available under our Credit Agreement will be sufficient to meet our expected operating needs, planned capital expenditures, debt service, tax obligations, pension benefit plan contributions, share repurchases required under our 2004 Stock Incentive Plan 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 our Credit Agreement, to finance any such acquisition.
Our Credit Agreement contains restrictive covenants that, among other things, limit our ability to incur debt, sell assets and engage in certain transactions. The indentures governing the 5½% Notes and the 5% Notes contain certain covenants that restrict our ability to create liens, engage in sale and leaseback transactions and consolidate, merge or sell assets. We do not expect these limitations to have a material effect on our business or our results of operations. 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 2016 with all of these covenants.
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 $6.6 million, $11.8 million and $6.9 million in 2015, 2014 and 2013, respectively. Additional cash spending under our rationalization plans of approximately $10.9 million is expected primarily in 2016. You should also read Note 3 to our Consolidated Financial Statements for the year ended December 31, 2015 included elsewhere in this Annual Report.





38


CONTRACTUAL OBLIGATIONS
Our contractual cash obligations at December 31, 2015 are provided below:
 
  
Payment due by period
 
Total
 
Less than
1 year
 
1-3
years
 
3-5
years
 
More than
5 years
 
(Dollars in millions)
Long-term debt obligations
$
1,525.8

 
$
152.4

 
$
143.5

 
$
929.9

 
$
300.0

Interest on fixed rate debt
208.1

 
42.0

 
83.7

 
64.5

 
17.9

Interest on variable rate debt(1)
43.9

 
15.7

 
20.0

 
8.2

 

Operating lease obligations
173.1

 
35.4

 
49.9

 
30.7

 
57.1

Purchase obligations(2) 
46.9

 
46.9

 

 

 

Other postretirement benefit obligations(3)
21.2

 
2.7

 
4.6

 
4.3

 
9.6

Total(4)
$
2,019.0

 
$
295.1

 
$
301.7

 
$
1,037.6

 
$
384.6

 ______________________

(1)
These amounts represent expected cash payments of interest on our variable rate long-term debt under our Credit Agreement, after taking into consideration our interest rate swap agreements, at prevailing interest rates at December 31, 2015.
(2)
Purchase obligations represent commitments for capital expenditures of $46.9 million. Obligations that are cancelable without penalty are excluded.
(3)
Other postretirement benefit obligations have been actuarially determined through the year 2025.
(4)
Based on current legislation and the current funded status of our domestic pension benefit plans, there are no significant minimum required contributions to our pension benefit plans in 2016.
At December 31, 2015, we also had outstanding letters of credit of $22.7 million that were issued under our Credit Agreement.
You should also read Notes 8, 9, 10 and 11 to our Consolidated Financial Statements for the year ended December 31, 2015 included elsewhere in this Annual Report.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
EFFECT OF INFLATION AND INTEREST RATE FLUCTUATIONS
Historically, inflation has not had a material effect on us, other than to increase our cost of borrowing. In general, we have been able to increase the sales prices of our products to reflect any increases in the prices of raw materials (subject to contractual lag periods) and to significantly reduce the exposure of our results of operations to increases in other costs, such as labor and other manufacturing costs.
Because we have indebtedness which bears interest at floating rates, our financial results will be sensitive to changes in prevailing market rates of interest. As of December 31, 2015, we had $1,525.8 million of indebtedness outstanding, of which $609.1 million bore interest at floating rates, after taking into account two interest rate swap agreements for an aggregate notional principal amount of $100.0 million that we entered into to mitigate the effect of interest rate fluctuations. Under these agreements, we pay fixed rates of interest ranging from 1.38 percent to 1.64 percent and receive floating rates of interest based on three month LIBOR. These agreements mature in 2017. Depending upon market conditions, we may enter into additional interest rate swap or hedge agreements (with counterparties that, in our judgment, have sufficient creditworthiness) to hedge our exposure against interest rate volatility.
CRITICAL ACCOUNTING POLICIES
U.S. generally accepted accounting principles require estimates and assumptions that affect the reported amounts in our consolidated financial statements and the accompanying notes. Some of these estimates and assumptions require difficult, subjective and/or complex judgments. Critical accounting policies cover accounting matters that are inherently uncertain because the future resolution of such matters is unknown. We believe that our

39


accounting policies for pension expense and obligations, rationalization charges and acquisition reserves and testing goodwill and other intangible assets with indefinite lives for impairment reflect the more significant judgments and estimates in our consolidated financial statements. You should also read our Consolidated Financial Statements for the year ended December 31, 2015 and the accompanying notes included elsewhere in this Annual Report.
Our pension expense and obligations are developed from actuarial valuations. Two critical assumptions in determining pension expense and obligations are the discount rate and expected long-term return on plan assets. We evaluate these assumptions at least annually. Other assumptions reflect demographic factors such as retirement, mortality and turnover and are evaluated periodically and updated to reflect our actual experience. Actual results may differ from actuarial assumptions. The discount rate represents the market rate for non-callable high-quality fixed income investments and is used to calculate the present value of the expected future cash flows for benefit obligations under our pension benefit plans. A decrease in the discount rate increases the present value of benefit obligations and increases pension expense, while an increase in the discount rate decreases the present value of benefit obligations and decreases pension expense. A 25 basis point change in the discount rate would have a countervailing impact on our annual pension expense by approximately $2.0 million. For 2015, we increased our domestic discount rate from 4.1 percent to 4.7 percent to reflect market interest rate conditions. We consider the current and expected asset allocations of our pension benefit plans, as well as historical and expected long-term rates of return on those types of plan assets, in determining the expected long-term rate of return on plan assets. A 25 basis point change in the expected long-term rate of return on plan assets would have a countervailing impact on our annual pension expense by approximately $1.8 million. Our expected long-term rate of return on plan assets will remain at 8.5 percent in 2016. Effective January 1, 2016, we changed the method that we use to estimate the service and interest components of net periodic benefit cost for our defined benefit pension and other postretirement benefit plans. This new method discounts the individual expected cash flows underlying the service and interest costs using the applicable individual spot rates derived from the yield curve used to discount the cash flows for the measurement of the benefit obligation. Historically, we estimated these service and interest cost components utilizing a single weighted average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. We have made this change to provide a more precise measurement of service and interest costs by correlating the projected benefit cash flows to the corresponding spot rates from the yield curve. This change in estimate will be accounted for prospectively and is not expected to have a significant impact on our income from operations for the year ended December 31, 2016. You should also read Note 11 to our Consolidated Financial Statements for the year ended December 31, 2015 included elsewhere in this Annual Report.
Historically, we have maintained a strategy of acquiring businesses and enhancing profitability through productivity and cost reduction opportunities. Acquisitions require us to estimate the fair value of the assets acquired and liabilities assumed in the transactions. These estimates of fair value are based on market participant perspectives when available and our business plans for the acquired entities, which include eliminating operating redundancies, facility closings and rationalizations and assumptions as to the ultimate resolution of liabilities assumed. We also continually evaluate the operating performance of our existing facilities and our business requirements and, when deemed appropriate, we exit or rationalize existing operating facilities. Establishing reserves for acquisition plans and facility rationalizations requires the use of estimates. Although we believe that these estimates accurately reflect the costs of these plans, actual costs incurred may differ from these estimates.
Goodwill and other intangible assets with indefinite lives are reviewed for impairment each year and more frequently if circumstances indicate a possible impairment. Our tests for impairment require us to make assumptions regarding the expected earnings and cash flows of our reporting units. These assumptions are based on our internal forecasts. Developing these assumptions requires the use of significant judgment and estimates. Actual results may differ from these forecasts. If an impairment were to be identified, it could result in additional expense recorded in our consolidated statements of income.
CHANGE IN DEPRECIABLE LIVES
Effective January 1, 2014, we increased the estimated useful lives of certain production equipment by an average of approximately 5 years to a maximum depreciable life of 20 years based on our evaluation of useful lives with the assistance of a third party appraiser. As a result, income from operations increased by $21.9 million and net income increased by $14.0 million, or $0.22 per diluted share, for the year ended December 31, 2014.


40


NEW ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board, or the FASB, issued an accounting standards update, or ASU, that amends the guidance for revenue recognition. This amendment contains principles that will require an entity to recognize revenue to depict the transfer of goods and services to customers at an amount that an entity expects to be entitled to in exchange for those goods or services. This amendment permits the use of one of two retrospective transition methods. In August 2015, the FASB deferred the effective date of this amendment. As a result, this amendment will be effective for us on January 1, 2018, with early adoption permitted up to one year prior to the effective date. We have not yet selected a transition method and are currently evaluating the impact of this amendment on our financial position, results of operations and cash flows.

In July 2015, the FASB issued an ASU that amends existing guidance for measuring inventories. This amendment will require us to measure inventories recorded using the first-in, first-out method and the average cost method at the lower of cost and net realizable value. This amendment does not change the methodology for measuring inventories recorded using the last-in, first-out method. This amendment will be effective for us on January 1, 2017. Early adoption is permitted. The adoption of this amendment will not have a material effect on our financial position, results of operations or cash flows.
FORWARD-LOOKING STATEMENTS
The statements we have made in “Risk Factors” and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and elsewhere in this Annual Report which 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 the Securities Exchange Act of 1934, as amended, or the Exchange Act. These 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. Therefore, the actual results of our operations or our financial condition could differ materially from those expressed or implied in these forward-looking statements.
The discussion in our “Risk Factors” and our “Management’s Discussion and Analysis of Results of Operations and Financial Condition” sections highlight some of the more important risks identified by our management, but should not be assumed to be the only factors that could affect future performance. Other factors that could cause the actual results of our operations or our financial condition to differ from those expressed or implied in these forward-looking statements include, but are not necessarily limited to, our ability to satisfy our obligations under our contracts; the impact of customer claims; compliance by our suppliers with the terms of our arrangements with them; changes in consumer preferences for different packaging products; changes in general economic conditions; the idling or loss of one or more of our significant manufacturing facilities; significant increases in the costs of health care benefits in the United States; the adoption of new accounting standards or interpretations; changes in income tax provisions; and other factors described elsewhere in this Annual Report or in our other filings with the SEC.
Except to the extent required by the federal securities laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors pursuant to the Private Securities Litigation Reform Act of 1995 should not be construed as exhaustive or as any admission regarding the adequacy of our disclosures. Certain risk factors are detailed from time to time in our various public filings. You are advised, however, to consult any further disclosures we make on related subjects in our filings with the SEC.
You can identify forward-looking statements by the fact that they do not relate strictly to historic or current facts. Forward-looking statements use terms such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “will,” “should,” “seeks,” “pro forma” or similar expressions in connection with any disclosure of future operating or financial performance. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks described under “Risk Factors,” that may cause our actual results of operations, financial condition, levels of activity, performance or achievements to be materially different from any future results of operations, financial condition, levels of activity, performance or achievements expressed or implied by such forward-looking statements. You should not place undue reliance on these forward-looking statements.
ITEM 7A. 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

41


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.
INTEREST RATE RISK
Our interest rate risk management objective is to limit the impact of interest rate changes on our net income and cash flow. To achieve our objective, we regularly evaluate the amount of our variable rate debt as a percentage of our aggregate debt. During 2015 and 2014, our average outstanding variable rate debt, after taking into account the average outstanding notional amount of our interest rate swap agreements, was 50 percent and 44 percent of our average outstanding total debt, respectively. At December 31, 2015, our outstanding variable rate debt, after taking into account interest rate swap agreements, was approximately 40 percent of our outstanding total debt. We manage a portion of our exposure to interest rate fluctuations in our variable rate debt through interest rate swap agreements. These agreements effectively convert interest rate exposure from variable rates to fixed rates of interest. We have entered into these agreements with banks under our Credit Agreement, and our obligations under these agreements are guaranteed and secured on a pari passu basis with our obligations under our Credit Agreement. You should also read Notes 4, 8 and 9 to our Consolidated Financial Statements for the year ended December 31, 2015 included elsewhere in this Annual Report which outline the principal and notional amounts, interest rates, fair values and other terms required to evaluate the expected cash flows from these agreements.
Based on the average outstanding amount of our variable rate indebtedness in 2015, a one percentage point change in the interest rates for our variable rate indebtedness would have impacted our 2015 interest expense by an aggregate of approximately $9.3 million, after taking into account the average outstanding notional amount of our interest rate swap agreements during 2015.
FOREIGN CURRENCY EXCHANGE RATE RISK
Currently, we conduct a portion of our manufacturing and sales activity outside the United States, primarily in Europe and Canada. In an effort to minimize foreign currency exchange risk, we have financed our acquisitions of our European and Canadian operations primarily with term loans borrowed under our Credit Agreement denominated in Euros and Canadian dollars, respectively. Our European operations include non-Euro denominated entities, including, most significantly, in Poland, Russia, Hungary, Turkey and the United Kingdom. We also have operations in Asia, South America and Central America that are not considered significant to our consolidated financial statements. Where available, we have borrowed funds in local currency or implemented certain internal hedging strategies to minimize our foreign currency risk related to foreign operations. In addition, we are exposed to gains and losses from limited transactions of our operations denominated in a currency other than the functional currency of such operations. We are also exposed to possible losses in the event of a currency devaluation in any of the foreign countries where we have operations. We generally do not utilize external derivative financial instruments to manage our foreign currency risk.
COMMODITY PRICING RISK
We purchase raw materials for our products such as metal and resins. These raw materials are generally purchased pursuant to contracts or at market prices established with the vendor. In general, we do not engage in hedging activities for these raw materials due to our ability to pass on price changes to our customers.
We also purchase commodities, such as natural gas and electricity, and are subject to risks on the pricing of these commodities. In general, we purchase these commodities pursuant to contracts or at market prices. We manage a portion of our exposure to natural gas price fluctuations through natural gas swap agreements. During 2015 and 2014, we entered into natural gas swap agreements to hedge approximately 28 percent and 6 percent, respectively, of our exposure to fluctuations in natural gas prices. As of December 31, 2015, we had entered into natural gas swap agreements to hedge approximately 28 percent of our expected 2016 exposure to fluctuations in natural gas prices. These agreements effectively convert pricing exposure for natural gas from market pricing to a fixed price. You should also read Notes 4 and 9 to our Consolidated Financial Statements for the year ended December 31, 2015 included elsewhere in this Annual Report which outline the terms necessary to evaluate these transactions.
Based on our natural gas usage in 2015, a ten percent change in natural gas costs would have impacted our 2015 cost of goods sold by approximately $1.4 million, after taking into account our natural gas swap agreements.

42



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
We refer you to Item 15, “Exhibits and Financial Statement Schedules,” below for a listing of financial statements and schedules included in this Annual Report, which are incorporated here in this Annual Report by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
As required by Rule 13a-15(e) of 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 Annual 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 SEC’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 Annual Report that have materially affected, or are reasonably likely to materially affect, these internal controls.
MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013 Framework). Based on this assessment and those criteria, management believes that we maintained effective internal control over financial reporting as of December 31, 2015.
The effectiveness of our internal control over financial reporting as of December 31, 2015 has been audited by Ernst & Young LLP, our independent registered public accounting firm, and Ernst & Young LLP has issued an attestation report on our internal control over financial reporting which is provided below.

43



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD OF DIRECTORS AND STOCKHOLDERS OF SILGAN HOLDINGS INC.
We have audited Silgan Holdings Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Silgan Holdings Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Silgan Holdings Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Silgan Holdings Inc. as of December 31, 2015 and 2014 and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015 of Silgan Holdings Inc. and our report dated February 25, 2016 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Stamford, Connecticut
February 25, 2016
ITEM 9B. OTHER INFORMATION.
None.


44


PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information with respect to directors, executive officers and corporate governance required by this Item is incorporated here in this Annual Report by reference to our Proxy Statement, to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report, for our annual meeting of stockholders to be held in 2016.
ITEM 11. EXECUTIVE COMPENSATION.
The information with respect to executive compensation required by this Item is incorporated here in this Annual Report by reference to our Proxy Statement, to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report, for our annual meeting of stockholders to be held in 2016.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The information with respect to security ownership of certain beneficial owners and management and related stockholder matters required by this Item is incorporated here in this Annual Report by reference to our Proxy Statement, to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report, for our annual meeting of stockholders to be held in 2016.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information with respect to certain relationships and related transactions, and director independence required by this Item is incorporated here in this Annual Report by reference to our Proxy Statement, to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report, for our annual meeting of stockholders to be held in 2016.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information with respect to principal accountant fees and services required by this Item is incorporated here in this Annual Report by reference to our Proxy Statement, to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report, for our annual meeting of stockholders to be held in 2016.


45


PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
FINANCIAL STATEMENTS:
 
SCHEDULE:
 
All other financial statement schedules not listed have been omitted because they are not applicable or not required, or because the required information is included in the consolidated financial statements or notes thereto.


















46



EXHIBITS:
 
Exhibit
Number
  
Description
3.1
  
Amended and Restated Certificate of Incorporation of Silgan Holdings Inc. (incorporated by reference to Exhibit 3.1 filed with our Current Report on Form 8-K, dated June 13, 2006, Commission File No. 000-22117).
 
 
3.2
  
Amendment to the Amended and Restated Certificate of Incorporation of Silgan Holdings Inc. to amend the stockholder voting standard (incorporated by reference to Exhibit 3.1 filed with our Current Report on Form 8-K, dated June 11, 2010, Commission File No. 000-22117).
 
 
3.3
  
Amendment to the Amended and Restated Certificate of Incorporation of Silgan Holdings Inc. to increase the number of authorized shares of our common stock (incorporated by reference to Exhibit 3.2 filed with our Current Report on Form 8-K, dated June 11, 2010, Commission File No. 000-22117).
 
 
3.4
  
Amended and Restated By-laws of Silgan Holdings Inc. (incorporated by reference to Exhibit 3.2 filed with our Current Report on Form 8-K, dated June 13, 2006, Commission File No. 000-22117).
 
 
3.5
  
First Amendment to Amended and Restated By-laws of Silgan Holdings Inc. (incorporated by reference to Exhibit 3.3 filed with our Annual Report on Form 10-K for the year ended December 31, 2007, Commission File No. 000-22117).
 
 
4.1
  
Indenture, dated as of March 23, 2012, by and between Silgan Holdings Inc. and U.S. Bank National Association, as trustee, with respect to the 5% Senior Notes due 2020 (incorporated by reference to Exhibit 4.1 filed with our Current Report on Form 8-K, dated March 29, 2012, Commission File No. 000-22117).
 
 
4.2
  
Form of Silgan Holdings Inc. 5% Senior Note due 2020 (incorporated by reference to Exhibit 4.2 filed with our Registration Statement on Form S-4, dated June 22, 2012, Registration Statement No. 333-182291).
 
 
4.3
  
Indenture, dated as of September 9, 2013, by and between Silgan Holdings Inc. and U.S. Bank National Association, as trustee, with respect to the 5½% Senior Notes due 2022 (incorporated by reference to Exhibit 4.1 filed with our Current Report on Form 8-K, dated September 13, 2013, Commission File No. 000-22117).
 
 
4.4
  
Form of Silgan Holdings Inc. 5½% Senior Note due 2022 (incorporated by reference to Exhibit 4.2 filed with our Current Report on Form 8-K, dated September 13, 2013, Commission File No. 000-22117).
 
 
10.1
  
Amended and Restated Stockholders Agreement, dated as of November 6, 2001, among R. Philip Silver, D. Greg Horrigan and Silgan Holdings Inc. (incorporated by reference to Exhibit 10.1 filed with our Annual Report on Form 10-K for the year ended December 31, 2001, Commission File No. 000-22117).
 
 
10.2
 
Credit Agreement, dated as of January 14, 2014, among Silgan Holdings Inc., Silgan Containers LLC, Silgan Plastics LLC, Silgan Containers Manufacturing Corporation, Silgan Can Company, Silgan Plastics Canada Inc., Silgan Holdings B.V., Silgan International Holdings B.V., each other revolving borrower party thereto from time to time, each other incremental term loan borrower party thereto from time to time, various lenders party thereto from time to time, Wells Fargo Bank, National Association, as Administrative Agent, Bank of America, N.A., as Syndication Agent, Citigroup Global Markets Inc. and Goldman Sachs Bank USA, as Co-Documentation Agents, and Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc. and Goldman Sachs Bank USA, as Joint Lead Arrangers and Joint Bookrunners (incorporated by reference to Exhibit 10.1 filed with our Current Report on Form 8-K, dated January 21, 2014, Commission File No. 000-22117).

47


Exhibit
Number
  
Description
 
 
+10.3
  
Employment Agreement, dated April 12, 2004, between Silgan Holdings Inc. and Anthony J. Allott (incorporated by reference to Exhibit 10 filed with our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004, Commission File No. 000-22117).
 
 
+10.4
  
Employment Agreement dated June 30, 2004 between Silgan Holdings Inc. and Robert B. Lewis (incorporated by reference to Exhibit 10.12 filed with our Annual Report on Form 10-K for the year ended December 31, 2004, Commission File No. 000-22117).
 
 
+10.5
  
Employment Agreement dated October 1, 2007 between Silgan Holdings Inc. and Adam J. Greenlee (incorporated by reference to Exhibit 10.1 filed with our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009, Commission File No. 000-22117).
 
 
+10.6
  
Officer Agreement dated October 1, 2007 between Silgan Holdings Inc. and Adam J. Greenlee (incorporated by reference to Exhibit 10.2 filed with our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009, Commission File No. 000-22117).
 
 
 
+10.7
 
Officer Agreement dated March 1, 2012 between Silgan Plastics LLC and Sarah T. Macdonald (incorporated by reference to Exhibit 10.1 filed with our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013, Commission File No. 000-22117).
 
 
 
+10.8
  
Silgan Holdings Inc. Senior Executive Performance Plan (incorporated by reference to Exhibit 10.19 filed with our Annual Report on Form 10-K for the year ended December 31, 2003, Commission File No. 000-22117).
 
 
 
+10.9
  
Amendment to Silgan Holdings Inc. Senior Executive Performance Plan (incorporated by reference to Exhibit 10.24 filed with our Annual Report on Form 10-K for the year ended December 31, 2006, Commission File No. 000-22117).
 
 
+10.10
 
Silgan Holdings Inc. Amended and Restated 2004 Stock Incentive Plan (incorporated by reference to Appendix A of our Definitive Proxy Statement on Schedule 14A, dated April 21, 2015, Commission File No. 000-22117).
 
 
 
+10.11
  
Form of Option Agreement (Employee) under the Silgan Holdings Inc. Amended and Restated 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.23 filed with our Annual Report on Form 10-K for the year ended December 31, 2004, Commission File No. 000-22117).
 
 
+10.12
  
Form of Restricted Stock Unit Agreement (Employee) under the Silgan Holdings Inc. Amended and Restated 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.28 filed with our Annual Report on Form 10-K for the year ended December 31, 2006, Commission File No. 000-22117).
 
 
+10.13
  
Form of Restricted Stock Unit Agreement (Director) under the Silgan Holdings Inc. Amended and Restated 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.22 filed with our Annual Report on Form 10-K for the year ended December 31, 2011, Commission File No. 000-22117).
 
 
+10.14
  
Silgan Containers Corporation Supplemental Executive Retirement Plan, as amended (incorporated by reference to Exhibit 10.4 filed with our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009, Commission File No. 000-22117).
 
 
 
+10.15
 
First Amendment to Silgan Containers Corporation Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.27 filed with our Annual Report on Form 10-K for the year ended December 31, 2010, Commission File No. 000-22117).
 
 
 
+10.16
 
Second Amendment to Silgan Containers Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.28 filed with our Annual Report on Form 10-K for the year ended December 31, 2010, Commission File No. 000-22117).
 
 
 
+10.17
 
Third Amendment to Silgan Containers Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.26 filed with our Annual Report on Form 10-K for the year ended December 31, 2011, Commission File No. 000-22117).
 
 
 

48


Exhibit
Number
  
Description
 
 
 
 
+10.18
  
Form of Indemnification Agreement for Directors and Executive Officers (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012, Commission File No. 000-22117).
 
 
 
*12    
  
Computation of Ratio of Earnings to Fixed Charges for the years ended December 31, 2015, 2014, 2013, 2012 and 2011.
 
 
14
  
Code of Ethics applicable to Silgan Holdings’ principal executive officers, principal financial officer, principal accounting officer or controller or persons performing similar functions (incorporated by reference to Exhibit 14 filed with our Annual Report on Form 10-K for the year ended December 31, 2003, Commission File No. 000-22117).
 
 
*21    
  
Subsidiaries of the Registrant.
 
 
*23    
  
Consent of Ernst & Young LLP.
 
 
*31.1  
  
Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
 
 
*31.2  
  
Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
 
 
*32.1  
  
Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
 
 
*32.2  
  
Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
 
 
*101.INS
  
XBRL Instance Document.
 
 
*101.SCH
  
XBRL Taxonomy Extension Schema Document.
 
 
*101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
*101.DEF
  
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
*101.LAB
  
XBRL Taxonomy Extension Label Linkbase Document.
 
 
*101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase Document.
 
 
 
___________________ 
*Filed herewith.
+ Management contract or compensatory plan or arrangement.

49






SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
SILGAN HOLDINGS INC.
 
 
 
Date: February 25, 2016
 
By:
 
/s/    Anthony J. Allott
 
 
 
 
 
 
Anthony J. Allott
 
 
 
 
 
 
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
 
Signature
  
Title
 
Date
 
 
 
/s/    R. Philip Silver
  
Co-Chairman of the Board
 
February 25, 2016
(R. Philip Silver)
 
 
 
 
 
 
 
/s/    D. Greg Horrigan
  
Co-Chairman of the Board
 
February 25, 2016
(D. Greg Horrigan)
 
 
 
 
 
 
 
/s/    John W. Alden
  
Director
 
February 25, 2016
(John W. Alden)
 
 
 
 
 
 
 
/s/    William C. Jennings
  
Director
 
February 25, 2016
(William C. Jennings)
 
 
 
 
 
 
 
 
/s/    Joseph M. Jordan
 
Director
 
February 25, 2016
(Joseph M. Jordan)
 
 
 
 
 
 
 
/s/    Edward A. Lapekas
  
Director
 
February 25, 2016
(Edward A. Lapekas)
 
 
 
 
 
 
 
/s/    Anthony J. Allott
  
President and
 
February 25, 2016
(Anthony J. Allott)
  
Chief Executive Officer and Director
 
 
 
 
(Principal Executive Officer)
 
 
/s/    Robert B. Lewis
  
Executive Vice President and
 
February 25, 2016
(Robert B. Lewis)
  
Chief Financial Officer
 
 
 
 
(Principal Financial and Accounting Officer)
 
 

50


Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Silgan Holdings Inc.
We have audited the accompanying consolidated balance sheets of Silgan Holdings Inc. as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Silgan Holdings Inc. at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Silgan Holdings Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 25, 2016 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Stamford, Connecticut
February 25, 2016

F-1


SILGAN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2015 and 2014
(Dollars in thousands, except share and per share data)


 
2015
 
2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
99,945

 
$
222,591

Trade accounts receivable, less allowances
of $4,975 and $5,497, respectively
281,041

 
310,732

Inventories
628,138

 
548,765

Prepaid expenses and other current assets
36,134

 
53,306

Total current assets
1,045,258

 
1,135,394

Property, plant and equipment, net
1,125,433

 
1,063,631

Goodwill
612,792

 
630,262

Other intangible assets, net
195,087

 
211,770

Other assets, net
214,109

 
233,079

 
$
3,192,679

 
$
3,274,136

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
Current liabilities:
 
 
 
Revolving loans and current portion of long-term debt
$
152,398

 
$
125,130

Trade accounts payable
477,171

 
423,905

Accrued payroll and related costs
45,094

 
46,242

Accrued liabilities
106,550

 
69,202

Total current liabilities
781,213

 
664,479

 
 
 
 
Long-term debt
1,361,149

 
1,458,942

Other liabilities
411,133

 
440,759

 
 
 
 
Commitments and contingencies

 

Stockholders’ equity:
 
 
 
Common stock ($0.01 par value per share; 200,000,000 shares
   authorized, 87,556,248 shares issued and 60,392,905 and
63,203,361 shares outstanding, respectively)
876

 
876

Paid-in capital
237,291

 
225,449

Retained earnings
1,446,193

 
1,313,521

Accumulated other comprehensive loss
(208,806
)
 
(165,624
)
Treasury stock at cost (27,163,343 and 24,352,887 shares,
   respectively)
(836,370
)
 
(664,266
)
Total stockholders’ equity