SILGAN HOLDINGS INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1998
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.
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(Exact name of registrant as specified in its charter)

Delaware 06-1269834
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(State of Incorporation) (I.R.S. Employer Identification No.)

4 Landmark Square, Stamford, Connecticut 06901
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(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: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.01 per share
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(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark 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. [X]

As of March 1, 1999, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $106,205,133.

As of March 1, 1999, the number of shares outstanding of the Registrant's common
stock, par value $0.01 per share, was 18,256,411.

Documents Incorporated by Reference:

Portions of the Registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held on May 18, 1999 are incorporated by reference in Part
III of this Annual Report on Form 10-K.

TABLE OF CONTENTS

Page

Part I............................................................................................................1
Item 1. Business..............................................................................................1
Item 2. Properties...........................................................................................14
Item 3. Legal Proceedings....................................................................................15
Item 4. Submission of Matters to a Vote of Security Holders..................................................15
PART II..........................................................................................................16
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................................16
Item 6. Selected Financial Data..............................................................................16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................20
Item 7A. Quantitative and Qualitative Disclosure About Market Risk...........................................35
Item 8. Financial Statements and Supplementary Data..........................................................35
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................35
PART III.........................................................................................................36
Item 10. Directors and Executive Officers of the Registrant..................................................36
Item 11. Executive Compensation..............................................................................39
Item 12. Security Ownership of Certain Beneficial Owners and Management......................................39
Item 13. Certain Relationships and Related Transactions......................................................39
PART IV..........................................................................................................40
Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K..................................40

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PART I

Item 1. Business

General

Silgan Holdings Inc. ("Holdings"; together with its direct and indirect
owned subsidiaries, the "Company") is a leading North American manufacturer of
consumer goods packaging products that currently produces (i) steel and aluminum
containers for human and pet food, (ii) custom designed plastic containers for
personal care, health, food, pharmaceutical and household detergent and chemical
products and (iii) specialty packaging items used in the food and beverage
industries, including metal caps and closures, aluminum roll-on closures,
plastic bowls, plastic cans and paperboard containers. The Company is the
largest manufacturer of metal food containers in North America, with a unit sale
market share in the United States for the year ended December 31, 1998 of 42% on
a historical basis and 46% on a pro forma basis after giving effect to its June
1998 acquisition of the steel container manufacturing business ("CS Can") of
Campbell Soup Company ("Campbell") as if such acquisition had occurred on
January 1, 1998. The Company is also a leading manufacturer of plastic
containers in North America for personal care products and a major supplier of
metal closures for food and beverage products. The Company's strategy is to
increase shareholder value by growing its existing businesses and expanding into
other segments by applying its expertise in acquiring, financing, integrating
and efficiently operating consumer goods packaging businesses.

The Company was founded in 1987 by its Co-Chief Executive Officers.
Since its inception, the Company has acquired sixteen businesses, including most
recently the acquisitions by its metal food container business of CS Can in June
1998 and by its plastic container business of Clearplass Containers, Inc.
("Clearplass") in August 1998 and Winn Packaging Co. ("Winn") in January 1998.
See "--Company History" and "--Recent Developments." As a result of its growth
strategy, the Company has more than quadrupled its overall share of the U.S.
metal food container market from approximately 10% in 1987 to approximately 46%
in 1998 on a pro forma basis after giving effect to the acquisition of CS Can as
if it had occurred on January 1, 1998. The Company's plastic container business
has also increased its market position from a sales base of $88.8 million in
1987 to $310.9 million in 1998, while sales of the Company's specialty packaging
business have grown from $9.6 million in 1994 to $128.8 million in 1998.

The Company's strategy has enabled it to rapidly increase its net sales
and income from operations. The Company's net sales have increased from $861.4
million in 1994 to $1,738.7 million in 1998, representing a compound annual
growth rate of approximately 19.2%. During this period, income from operations
increased from $75.1 million in 1994 (excluding the effect of the $16.7 million
non-cash charge for the reduction in carrying value of assets) to $154.3 million
in 1998, representing a compound annual growth rate of approximately 19.7%,
while the Company's income from operations as a percentage of net sales
increased 2.1 percentage points from 6.8% to 8.9% over the same period.

The Company's operating philosophy, which has contributed to its strong
performance since inception, is based on: (i) a significant equity ownership by
management and an entrepreneurial approach to business, (ii) its low cost
producer position and (iii) its long-term customer relationships. The Company's
senior management has a significant ownership interest in the Company, which
fosters an entrepreneurial management style and places a primary focus on
creating shareholder value. The Company has achieved a low cost producer status
through (i) the maintenance of a flat, efficient organizational structure,
resulting in low selling, general and administrative expenses as a percentage of
total net sales, (ii) purchasing economies, (iii) significant capital
investments that have generated manufacturing and production efficiencies, (iv)
plant consolidations and rationalizations and (v) the proximity of its plants to
its customers. The Company's philosophy has also been to develop long-term

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customer relationships by acting in partnership with customers, providing
reliable quality and service and utilizing its low cost producer position. This
philosophy has resulted in numerous long-term supply contracts, high retention
of customers' business and recognition from customers, as demonstrated by the
Company's many quality and service awards.

Growth Strategy

The Company intends to enhance its position as a leading supplier of
consumer goods packaging products by continuing to aggressively pursue a
strategy designed to achieve future growth and to increase profitability. The
key components of this strategy are to (i) increase the Company's market share
in its current business lines through acquisitions and internal growth, (ii)
expand into complementary business lines by applying the Company's acquisition
and operating expertise to other areas of the North American consumer goods
packaging market and (iii) improve the profitability of acquired businesses
through integration, rationalization and capital investments to enhance their
manufacturing and production efficiency.

Increase Market Share Through Acquisitions and Internal Growth. The
Company has increased its revenues and market share in the metal food container,
plastic container and specialty packaging markets through acquisitions and
internal growth. As a result of this strategy, the Company has diversified its
customer base, geographic presence and product line. In its acquisitions, the
Company has followed a disciplined approach of acquiring businesses at
reasonable cash flow multiples. Management believes that certain industry trends
exist which will enable the Company to continue to acquire attractive businesses
in its existing markets.

The Company's overall share of the U.S. metal food container market has
more than quadrupled since 1987 and, for 1998, on a pro forma basis after giving
effect to the acquisition of CS Can as if it had occurred on January 1, 1998,
would have been 46%. During the past eleven years, the metal food container
market has experienced significant consolidation due to the desire by food
processors to reduce costs and focus resources on their core operations. The
Company's acquisitions of the metal food container manufacturing operations of
Nestle Food Company ("Nestle"), The Dial Corporation ("Dial"), Del Monte
Corporation ("Del Monte"), Agrilink Foods, Inc. ("Agrilink") and, most recently,
Campbell reflect this trend. Additionally, in 1995 the Company acquired the Food
Metal and Specialty business ("AN Can") of American National Can Company
("ANC"), expanding its customer base and geographic diversity. See "--Company
History" and "--Recent Developments."

The Company's plastic container business has increased its market
position from a sales base of $88.8 million in 1987 to $310.9 million in 1998
primarily through strategic acquisitions, including its 1998 acquisitions of
Clearplass, a manufacturer of rigid polyethylene terephthalate ("PET")
containers primarily for the personal care and pharmaceutical markets, and Winn,
a manufacturer of decorated rigid plastic containers. See "--Company History"
and "--Recent Developments." The plastic container segment of the consumer goods
packaging industry is highly fragmented, and management intends to pursue
consolidation opportunities in that segment as evidenced by its recent
acquisitions. The Company also expects to continue to generate internal growth.
For example, the Company intends to aggressively market its family of stock PET
containers provided by its Clearplass acquisition to the personal care and
pharmaceutical markets, using its sales force as well as distributors and taking
advantage of its existing customer relationships. Additionally, due to
increasing consumer preference for plastic as a substitute for glass, the
Company is aggressively pursuing opportunities for its custom designed PET and
high density polyethylene ("HDPE") containers. These opportunities include
producing PET containers for food and regional bottled water companies, and PET
and HDPE containers for markets such as hair care, skin care, oral care and
household detergents and chemicals.

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The Company also believes that there will be opportunities to expand
its specialty packaging business, which generated net sales of $128.8 million
for the year ended December 31, 1998. The Company's acquisition strategy with
respect to its specialty packaging business is to acquire businesses with a
significant percentage of a niche market in the consumer goods packaging
industry. The Company's acquisition of the North American aluminum roll-on
closure business ("Roll-on Closures") of Alcoa Closure Systems International,
Inc. in April 1997 reflects this strategy. In addition to aluminum roll-on
closures, specialty packaging products manufactured by the Company include steel
closures for glass and plastic containers; its licensed Omni plastic container,
a multi-layer microwaveable plastic bowl with an easy-open metal end; its
licensed Procan multi-layer plastic can with an easy-open metal end; and
paperboard containers.

Expand into Complementary Business Lines Through Acquisitions.
Management believes that it can successfully apply its acquisition and operating
expertise to new segments of the consumer goods packaging industry. For example,
with the Roll-on Closures and AN Can acquisitions, the Company expanded its
specialty packaging business into aluminum roll-on closures, steel caps and
closures and its licensed Omni plastic container. Management believes that
certain trends in and characteristics of the North American consumer goods
packaging industry will continue to generate attractive acquisition
opportunities in complementary business lines. Importantly, the industry is
fragmented, with numerous segments and multiple participants in the various
segments. Many of these segments are experiencing consolidation.

Enhance Profitability of Acquired Companies. The Company seeks to
acquire businesses at reasonable cash flow multiples and to enhance
profitability through productivity and cost reduction opportunities. The
additional sales and production capacity provided through acquisitions have
enabled the Company to rationalize plant operations and decrease overhead costs
through plant closings and downsizings. In addition, the Company's acquisitions
have enabled it to realize manufacturing efficiencies as a result of optimizing
production scheduling and minimizing product transportation costs. The Company
has also benefited from the economies of its increased purchasing volume and
from the elimination of redundant selling and administrative functions, as well
as from the investment of capital to upgrade the acquired facilities. In
addition to the benefits realized through the integration of acquired
businesses, the Company has improved the operating performance of its existing
plant facilities by making capital investments for productivity improvements and
manufacturing cost reductions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Operating Strategy."

Financial Strategy

The Company's financial strategy is to use leverage to support its
growth and increase shareholder returns. The Company's stable and predictable
cash flow, generated largely as a result of its long-term customer relationships
and generally recession resistant business, supports its financial strategy.
Management has successfully operated its businesses and achieved its growth
strategy while managing the Company's indebtedness. Management intends to
continue to apply this financial strategy in its business.

In 1997 and 1996, as the Company's revenues and operating income
increased and the Company's financial position improved, the Company refinanced
substantially all of its indebtedness with lower cost indebtedness and equity to
further improve its cash flow and operating and financial flexibility. In
addition to lowering its cost of indebtedness, the Company's refinancings have
(i) extended the maturities of its indebtedness, (ii) changed certain covenants
to improve the Company's operating and financial flexibility, including changes
to provide more flexibility to engage in mergers and acquisitions, make capital
expenditures, incur indebtedness, pay dividends, repurchase stock and refinance
indebtedness, and (iii) provided additional borrowing availability under the
Company's U.S. bank credit agreement for it to use to pursue its growth

3

strategy. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Financial Strategy" and "--Capital Resources and
Liquidity."

Business Segments

Holdings is a holding company that conducts its business through two
wholly owned operating subsidiaries, Silgan Containers Corporation (together
with its subsidiaries, "Containers") and Silgan Plastics Corporation (together
with its subsidiaries, "Plastics"). Containers' operations include the Company's
metal food container business and specialty packaging business. See Note 17 to
the Company's Consolidated Financial Statements for the year ended December 31,
1998 included elsewhere in this Annual Report on Form 10-K.

Metal Food Container Business. For 1998, the Company's metal food
container business had net sales of $1,299.0 million (approximately 75% of the
Company's net sales) and income from operations of $116.1 million (approximately
74% of the Company's income from operations) (without giving effect to corporate
expense). The Company's metal food container business has realized compound
annual unit sales growth in excess of 16% since 1994. The Company's metal food
container business is engaged in the manufacture and sale of steel and aluminum
containers that are used primarily by processors and packagers for human and pet
food. The Company's metal food container business manufactures metal containers
for soup, vegetables, fruit, pet food, meat, tomato based products, coffee,
seafood, adult nutritional drinks and other miscellaneous food products. The
Company estimates that approximately 80% of its projected metal food container
sales in 1999 will be pursuant to long-term supply arrangements, including
agreements with Nestle, Del Monte, Campbell and several other major food
processors. See "--Sales and Marketing."

Plastic Container Business. For 1998, Plastics had net sales of $310.9
million (approximately 18% of the Company's net sales) and income from
operations of $38.0 million (approximately 24% of the Company's income from
operations) (without giving effect to corporate expense). Plastics emphasizes
value-added design, fabrication and decoration of custom designed PET and HDPE
containers in its business. Plastics manufactures custom designed HDPE
containers for health and personal care products, including containers for
shampoos, conditioners, hand creams, lotions, cosmetics and toiletries,
household detergent and chemical products, including containers for scouring
cleaners, cleaning agents and lawn and garden chemicals, and pharmaceutical
products, including containers for tablets, antacids and eye cleaning solutions.
In addition, Plastics manufactures custom designed PET containers for mouthwash,
respiratory and gastrointestinal products, liquid soap, skin care lotions, salad
dressings, condiments, instant coffee, bottled water and liquor. Because these
products are characterized by short product life and a demand for creative
packaging, the containers manufactured for these products generally have more
sophisticated designs and decorations. Plastics also manufactures a family of
stock PET containers provided by its Clearplass acquisition for the personal
care and pharmaceutical markets.

Specialty Packaging Business. For 1998, the Company's specialty
packaging business had net sales of $128.8 million (approximately 7% of the
Company's net sales) and income from operations of $3.3 million (approximately
2% of the Company's income from operations) (without giving effect to corporate
expense). The Company's specialty packaging business manufactures and sells
steel caps and closures, aluminum roll-on closures, Omni and Procan plastic
containers and paperboard containers used in the food and beverage industries.
The Company's specialty packaging business is also engaged in the development of
new proprietary technology for easy open plastic ends. The Company intends to
market its easy open plastic ends with its Omni plastic containers.

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Manufacturing and Production

As is the practice in the industry, most of the Company's customers
provide it with quarterly or annual estimates of products and quantities
pursuant to which periodic commitments are given. Such estimates enable the
Company to effectively manage production and control working capital
requirements. The Company schedules its production to meet customers'
requirements. Because the production time for the Company's products is short,
the backlog of consumer orders in relation to its sales is not material.

Metal Food Container Business

The manufacturing operations of the Company's metal food container
business include cutting, coating, lithographing, fabricating, assembling and
packaging finished cans. Three basic processes are used 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, the
Company manufactures 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, the Company manufactures steel two-piece cans by using a
drawing and ironing process. Quality and stackability of such cans are
comparable to that of the shallow two-piece cans described above. Can bodies and
ends are manufactured from thin, high-strength aluminum alloys and steels by
utilizing proprietary tool and die designs and selected can making equipment.

Plastic Container Business

The Company utilizes 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.

The Company believes that its proprietary equipment for the production
of HDPE containers is particularly well-suited for the use of post-consumer
recycled ("PCR") resins because of the relatively low capital costs required to
convert its equipment to utilize multi-layer container construction.

The Company's decorating methods for its plastic containers include (i)
in-mold labeling which applies a plastic film label to the bottle during the
blowing process and (ii) post-mold decoration. Post-mold decoration includes (i)
silk screen decoration which enables the applications of images in multiple
colors to the bottle, (ii) pressure sensitive decoration which uses a plastic
film or paper label with an adhesive, (iii) heat transfer decoration which uses
a plastic coated label applied by heat, and (iv) hot stamping decoration which
transfers images from a die using metallic foils. The Company has
state-of-the-art decorating equipment, including several of the largest
sophisticated decorating facilities in the country.

Specialty Packaging Business

The Company's manufacturing operations for metal closures include
cutting, coating, lithographing, fabricating and lining closures. The Company
manufactures continuous thread and lug style steel caps and closures and

5

aluminum roll-on closures for glass and plastic containers, ranging in size from
18 to 120 millimeters in diameter. The Company employs state-of-the-art
multi-die presses to manufacture closures, offering it a low-cost, high quality
means of production.

The Company's Omni and Procan plastic containers are manufactured using
a plastic injection blowmolding process where dissimilar pellets of plastic are
heated and co-injected in a proprietary process to form a five-layer preform,
which is immediately transferred to a blowmold for final shaping and cooling.
The Company designed its equipment for this manufacturing process, and the
equipment utilizes a variety of proprietary processes to make rigid plastic
containers capable of holding processed foods for extended shelf lives. The
Company's Omni plastic container is a multi-layer microwaveable bowl,
predominantly used for single serve food applications, with an easy open
aluminum end that is manufactured by the Company's metal food container
business. The Company's Procan container is a multi-layer plastic can with an
easy open metal end, which can package retortable, hard-to-hold food products.
The Company's Omni and Procan plastic containers are manufactured pursuant to a
royalty-free, perpetual license with ANC which was entered into in connection
with the Company's acquisition of AN Can.

The Company's specialty packaging business is also engaged in the
manufacture of paperboard containers and in the development of new proprietary
closure technology. See "--General--Business Segments--Specialty Packaging
Business."

Raw Materials

The Company does not believe that it is materially dependent upon any
single supplier for any of its raw materials, and, based upon the existing
arrangements with suppliers, its current and anticipated requirements and market
conditions, the Company believes that it has made adequate provisions for
acquiring raw materials. Although increases in the prices of raw materials have
generally been passed along to the Company's customers in accordance with the
Company's long-term supply arrangements and otherwise, any inability to do so in
the future could have a significant impact on the Company's results of
operations.

Metal Food Container Business

The Company uses tin plated and chromium plated steel, aluminum, copper
wire, organic coatings, lining compound and inks in the manufacture and
decoration of its metal food container products. The Company's material
requirements are supplied through purchase orders with suppliers with whom the
Company, through its predecessors, has long-term relationships. If its suppliers
fail to deliver under their arrangements, the Company would be forced to
purchase raw materials on the open market, and no assurances can be given that
it would be able to make such purchases at comparable prices or terms. The
Company believes that it will be able to purchase sufficient quantities of steel
and aluminum can sheet for the foreseeable future.

Plastic Container Business

The raw materials used by the Company for the manufacture of plastic
containers are primarily resins in pellet form such as virgin HDPE, virgin PET,
HDPE-PCR, recycled PET and, to a lesser extent, low density polyethylene,
extrudable polyethylene terephthalate, polyethylene terephthalate glycol,
polypropylene, polyvinyl chloride and medium density polyethylene. The Company's
resin requirements are acquired through multi-year arrangements for specific
quantities of resins with several major suppliers of resins. The price that the
Company pays for resin raw materials is not fixed and is subject to market
pricing. The Company believes that it will be able to purchase sufficient
quantities of resins for the foreseeable future.

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Specialty Packaging Business

The Company uses tin plated and chromium plated steel, aluminum,
organic coatings, low-metallic inks and pulpboard, plastic and organic lining
materials in its metal closure operations. The Company purchases polypropylene,
HDPE, ethyl vinyl alcohol and colorant resins for its Omni and Procan plastic
containers. The Company also currently purchases a proprietary compounded resin
product from a supplier for its Omni plastic container, which resin is produced
pursuant to a license with ANC. The Company uses paperboard and various inks for
its paperboard container manufacturing operations. The Company typically
purchases these materials from suppliers under annual or multi-year supply
arrangements, subject to market pricing. If suppliers fail to deliver under
these arrangements, the Company would be forced to purchase these materials on
the open market, and no assurance can be given that it would be able to purchase
materials of comparable quality or at comparable prices or terms. The Company
believes that it will be able to purchase sufficient quantities of raw materials
for its specialty packaging business in the foreseeable future.

Sales and Marketing

The Company's philosophy has been to develop long-term customer
relationships by acting in partnership with its customers, providing reliable
quality and service and utilizing its low cost producer position. The Company
markets its products in most areas of North America primarily by a direct sales
force and for its plastic container and specialty packaging businesses, in part,
through a network of distributors. Because of the high cost of transporting
empty containers, the Company's metal food and plastic container businesses
generally sell to customers within a 300 mile radius of their manufacturing
plants. See also "--Competition."

In 1998, 1997 and 1996, approximately 14%, 17% and 17%, respectively,
of the Company's sales were to Nestle, and approximately 12%, 11% and 12%,
respectively, of the Company's sales were to Del Monte. No other customer
accounted for more than 10% of the Company's total sales during such years.

Metal Food Container Business

The Company is the largest manufacturer of metal food containers in
North America, with a unit sale market share in 1998 in the United States of
approximately 46% on a pro forma basis after giving effect to its acquisition of
CS Can as if it had occurred on January 1, 1998. The Company's largest customers
for this segment include Nestle, Del Monte, Campbell, Dial, H.J. Heinz Co.,
Hormel Foods Corp., International Home Foods, Inc., Kal Kan Foods Incorporated,
Land O' Lakes, Inc. and The Pillsbury Company.

The Company has entered into multi-year supply arrangements with many
of its customers, including Nestle, Del Monte, Campbell and several other major
food producers. The Company estimates that approximately 80% of its projected
metal food container sales in 1999 will be pursuant to such multi-year supply
arrangements. Historically, the Company has been successful in continuing these
multi-year supply arrangements with its customers. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Operating
Strategy" and "--Financial Strategy."

Since its inception in 1987, the Company has supplied Nestle with
substantially all of its metal container requirements. In 1998, total sales of
metal containers by the Company to Nestle were $235.9 million. The Company
currently has three supply agreements with Nestle (the "Nestle Supply
Agreements") under which it supplies Nestle with a large majority of its metal
containers requirements (representing approximately 9.8% of the Company's 1998
sales). The terms of the Nestle Supply Agreements continue through 2004. The

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Nestle Supply Agreements provide for certain prices and specify that such prices
will be increased or decreased based upon cost change formulas set forth
therein. These agreements contain provisions that require the Company to
maintain certain levels of product quality, service and delivery in order to
retain the business. In the event of a breach of any such agreement, Nestle may
terminate such Nestle Supply Agreement but the other Nestle Supply Agreements
would remain in effect. Under certain limited circumstances, Nestle may provide
to the Company a competitive bid for less than half of the metal containers
sales under these agreements. The Company has the right to retain the business
subject to the terms of such bid. There can be no assurance that such bid will
be made at sales prices currently in effect for such metal containers, and until
such bid is received the Company cannot predict the effect, if any, on its
results of operations of matching or not matching such bid. In the event the
Company chooses not to match such bid, the Nestle Supply Agreements will
terminate effective December 31, 2001 only with respect to the metal containers
which are the subject of such bid.

The Company also supplies metal containers to Nestle pursuant to
purchase orders from Nestle (representing approximately 3.8% of the Company's
1998 sales). These sales are substantially pursuant to supply arrangements that
the Company has had with Nestle since 1987. There can be no assurance, however,
that the Company will continue to supply such metal containers to Nestle in any
future period. However, the Company believes that the loss of any such sales
would not have a material adverse effect on the Company's results of operations.

In connection with the Company's acquisition of Del Monte's U.S. metal
container manufacturing operations in December 1993, the Company and Del Monte
entered into a ten year supply agreement (the "DM Supply Agreement") pursuant to
which Del Monte has agreed to purchase from the Company substantially all of its
annual requirements for metal containers to be used for the packaging of food
and beverages in the United States, subject to certain limited exceptions. In
November 1998, the Company and Del Monte agreed to extend the term of the DM
Supply Agreement by three years until December 21, 2006 in return for certain
price reductions which went into effect in 1999. The Company believes that these
price reductions will not have a material adverse effect on its financial
condition or results of operations. In 1998, sales of metal containers by the
Company to Del Monte were $207.6 million. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Operating Strategy"
and "--Financial Strategy."

The DM Supply Agreement provides for certain prices for metal
containers supplied by the Company to Del Monte and specifies that such prices
will be increased or decreased based upon specified cost change formulas. Under
the DM Supply Agreement, Del Monte may, under certain circumstances, receive
proposals from independent commercial can manufacturers for the supply of
containers of a type and quality similar to the metal containers that the
Company furnishes to Del Monte, which proposals must be for the remainder of the
term of the DM Supply Agreement and for 100% of the annual volume of containers
at one or more of Del Monte's processing facilities. The Company has the right
to retain the business subject to the terms and conditions of such competitive
proposal. There can be no assurance that any such proposal will be made at sales
prices equivalent to those currently in effect or otherwise on terms similar to
those currently in effect. The Company cannot predict the effect, if any, on its
results of operations of matching or not matching any such proposal. During the
term of the DM Supply Agreement, Del Monte is not permitted to purchase pursuant
to such proposals more than 50% of its metal containers from suppliers other
than the Company.

In connection with the Company's June 1998 acquisition of CS Can, the
Company and Campbell entered into a ten-year supply agreement (the "Campbell
Supply Agreement"). Under the Campbell Supply Agreement, Campbell has agreed to
purchase from the Company for the term of such agreement substantially all of
its steel container requirements to be used for the packaging of foods and
beverages in the United States. Annual sales to Campbell under the Campbell
Supply Agreement are expected to be in excess of $200 million.

8

The Campbell Supply Agreement provides for certain prices for
containers supplied by the Company to Campbell and specifies that such prices
will be increased or decreased based upon specified cost change formulas. The
Campbell Supply Agreement permits Campbell, beginning in June 2003, to receive
proposals from independent commercial can manufacturers for the supply of
containers of a type and quality similar to the metal containers supplied by the
Company to Campbell, which proposals must be for the remainder of the term of
the Campbell Supply Agreement and for 100% of the annual volume of containers at
any one or more of Campbell's food processing plants. The Company has the right
to retain the business subject to the terms and conditions of such competitive
proposal. Until a competitive bid is received, the Company cannot predict the
effect, if any, on its results of operations of matching or not matching any
such bids. Upon any material breach by the Company of its obligations under the
Campbell Supply Agreement, Campbell has the right to terminate such agreement.
In addition, Campbell has the right, at the end of the term of the Campbell
Supply Agreement or upon the occurrence of certain material defaults under
agreements with Campbell (including certain events of bankruptcy, certain
defaults under the Company's agreements governing its material indebtedness, and
certain breaches, after applicable cure periods, by the Company of its material
obligations under its agreements with Campbell), to purchase from the Company
the assets used to manufacture containers for Campbell that are located at the
facilities that the Company leases from Campbell. The purchase price for such
assets would be determined at the time of purchase in accordance with an agreed
upon formula that is based upon the net book value of the assets.

The Company's metal food container business sales are dependent, in
part, upon the vegetable, tomato and fruit harvests in the midwest and western
regions of the United States. The size and quality of these harvests varies from
year to year, depending in large part upon the weather conditions in those
regions, and the Company's results of operations could be impacted accordingly.
The Company's results of operations could be materially adversely affected in a
year in which crop yields are substantially lower than normal in either of the
prime agricultural regions of the United States in which the Company operates.

The sale of metal containers to vegetable and fruit processors is
seasonal and monthly revenues increase during the months of June through
October. As is common in the packaging industry, the Company must build
inventory and then carry accounts receivable for some seasonal customers beyond
the end of the season. Consistent with industry practice, such customers may
return unused containers. Historically, such returns have been minimal.

Plastic Container Business

The Company is one of the leading manufacturers of custom designed HDPE
and PET containers sold in North America. The Company markets its plastic
containers in most areas of North America through a direct sales force and
through a large network of distributors. Management believes that the Company is
a leading manufacturer of plastic containers in North America for personal care
products. More than 70% of the Company's plastic containers are sold for health
and personal care products, such as hair care, skin care, oral care,
pharmaceutical and other health care applications. The Company's largest
customers in these product segments include the Helene Curtis and
Chesebrough-Ponds divisions of Unilever Home and Personal Care North America,
The Procter & Gamble Co., Warner-Lambert Co., Bristol-Myers Squibb Co. and Avon
Products Inc. The Company also manufactures plastic containers for food and
beverage products, such as salad dressings, condiments, bottled water and
liquor. Customers in these product segments include The Procter & Gamble Co.,
Kraft Foods Inc., and The Torbitt & Castleman Company.

As part of its marketing strategy, the Company has arrangements to sell
some of its plastic products to distributors, who in turn sell such products

9

primarily to regional customers. Plastic containers sold to distributors are
manufactured by using generic molds with decoration, color and neck finishes
added to meet the distributors' individual requirements. The distributors'
warehouses and their sales personnel enable the Company to market and inventory
a wide range of such products to a variety of customers.

Plastics has written purchase orders or contracts for the supply of
containers with the majority of its customers. In general, these purchase orders
and contracts are for containers made from proprietary molds and are for a
duration of 2 to 5 years.

Specialty Packaging Business

The Company believes that in the United States it is the largest
manufacturer of aluminum roll-on closures, the largest manufacturer of
retortable, multi-layer microwaveable plastic bowls for single serve food
applications, and the third largest supplier of steel closures. The Company's
metal closures are used by food processors for hot-filled foods, including pasta
sauces, salsas, apple sauces and new-age beverages such as ready-to-drink teas,
juices and isotonics; pickles; coffee creamer; mayonnaise; beers and wines;
bottled water and carbonated beverages; chocolate drinks; and liquor products.
The Company's Omni and Procan plastic containers are used by food processors for
microwaveable soup, pasta and meat single serve meals; pie fillings; and salsa.

The Company's specialty packaging business has had long-term
relationships with many of its customers. A majority of the sales of the
specialty packaging business are pursuant to multi-year contracts that contain
provisions for the pass through of material and labor cost changes. The
Company's largest customers in this segment include Campbell, Lipton (a division
of Unilever N.V.), Anheuser-Busch Companies, Inc., Triarc Beverage Group,
Nestle, Hormel Foods Corp., Gerber Products Co. (a unit of Novartis Consumer
Health, Inc.), Cadbury Schweppes Delaware LP, PepsiCo Inc., Arizona Beverage Co.
and Miller Brewing Co.

The Company's specialty packaging business sells its products primarily
through a direct sales force. The Company also supplements its sales of
specialty packaging products through its use of several regional distributors,
thereby allowing the Company to market these products to a wider variety of
customers throughout the United States.

Competition

The packaging industry is highly competitive. The Company competes in
this industry with other packaging manufacturers as well as fillers, food
processors and packers who manufacture containers for their own use and for sale
to others. Certain of the Company's competitors may have greater financial
resources than the Company. The Company attempts to compete effectively through
the quality of its products, competitive pricing and its ability to meet
customer requirements for delivery, performance and technical assistance.

Because of the high cost of transporting empty containers, the
Company's metal food and plastic container businesses generally sell to
customers within a 300 mile radius of its manufacturing plants. Strategically
located existing plants give the Company an advantage over competitors from
other areas, and the Company could be disadvantaged by the relocation of a major
customer. As of March 1, 1999, the Company operated 60 manufacturing facilities,
geographically dispersed throughout the United States and Canada, that serve the
distribution needs of its customers.

10

Metal Food Container Business

Of the commercial metal food container manufacturers, Crown Cork and
Seal Company, Inc. and Ball Corporation are the Company's most significant
national competitors. As an alternative to purchasing containers from commercial
can manufacturers, customers have the ability to invest in equipment to
self-manufacture their containers.

Although metal containers face continued competition from plastic,
paper, glass and composite containers, management believes that metal containers
are superior to plastic and paper containers in applications where the contents
are processed at high temperatures, where the contents are packaged in large or
institutional quantities (14 to 64 oz.) or where long-term storage of the
product is desirable. Management also believes that metal containers are more
desirable generally than glass containers because metal containers are more
durable and less costly to transport.

Plastic Container Business

Plastics competes with a number of large national producers of plastic
containers for personal care, health, food, beverage, pharmaceutical and
household detergent and chemical products, including Owens-Illinois, Inc., Crown
Cork and Seal Company, Inc., Schmalbach-Lubeca AG, Suiza Foods Corp. and
Plastipak Packaging Inc. In order to compete effectively in the constantly
changing market for plastic bottles, the Company 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 bottles.

Specialty Packaging Business

The Company's competitors in the manufacture and sale of metal closures
include WhiteCap (a unit of Schmalbach-Lubeca AG), Anchor Closures (a unit of
Crown Cork and Seal Company, Inc.), and Zapata International Corp. The Company
competes in the manufacture and sale of metal closures through its established
customer relationships, the quality of its products, its service, and its low
cost producer position. While management believes that metal closures are
superior to plastic closures because they offer stronger product integrity and
greater aesthetics through metal lithography, metal closures have faced
competition for several years from plastic substitutions, particularly as PET
plastic containers have replaced glass containers. To compete effectively, the
Company's specialty packaging business must continue to grow market share with
its existing customers, particularly as the food and beverage industry
consolidates, and market the advantages of its products.

The Company's Omni and Procan plastic containers compete with certain
plastic thermoformed containers produced by Rexam plc and PRI, Inc. and with
metal containers similar to those produced by the Company's metal food container
business. The Company believes that its Omni and Procan products are able to
compete effectively because of their convenience, microwaveability,
processability and ability to package hard-to-hold food products.

Employees

As of December 31, 1998, the Company employed approximately 1,280
salaried and 5,160 hourly employees on a full-time basis. Approximately 54% of
the Company's hourly plant employees are represented by a variety of unions. In
addition, in connection with the Company's acquisition of CS Can, Campbell is
currently providing to the Company approximately 820 hourly employees on a
full-time basis at the facilities leased by the Company from Campbell.

11

The Company's labor contracts expire at various times between 1999 and
2008. Contracts covering approximately 6% of the Company's hourly employees
presently expire during 1999. The Company expects no significant changes in its
relations with these unions. Management believes that its relationship with its
employees is good.

Regulation

The Company is subject to federal, 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. The Company believes that
all of its facilities are either in compliance in all material respects with all
presently applicable environmental laws and regulations or are operating in
accordance with appropriate variances, delayed compliance orders or similar
arrangements.

In addition to costs associated with regulatory compliance, the Company
may be held liable for alleged environmental damage associated with the past
disposal of hazardous substances. Generators of hazardous substances disposed of
at sites at which environmental problems are alleged to exist, as well as the
owners of those sites and certain other classes of persons, are subject to
claims under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 ("CERCLA") regardless of fault or the legality of the
original disposal. Liability under CERCLA and under many similar state statutes
is joint and several, and, therefore, any responsible party may be held liable
for the entire cleanup cost at a particular site. Other state statutes may
impose proportionate rather than joint and several liability. The federal
Environmental Protection Agency or a state agency may also issue orders
requiring responsible parties to undertake removal or remedial actions at
certain sites.

The Company is also subject to the Occupational Safety and Health Act
and other laws regulating noise exposure levels and other safety and health
concerns in the production areas of its plants.

Management does not believe that any of the regulatory matters
described above individually or in the aggregate will have a material effect on
the Company's capital expenditures, earnings, financial position or competitive
position.

Research and Product Development

The Company's research, product development and product engineering
efforts relating to its metal food containers and specialty packaging businesses
are conducted at its new research facility in Oconomowoc, Wisconsin. The
Company's research, product development and product engineering efforts with
respect to its plastic containers business are performed by its manufacturing
and engineering personnel located at its Norcross, Georgia facility.

Company History

Holdings is a Delaware corporation formed as a holding company to
acquire interests in various packaging manufacturers. Holdings' principal assets
are all of the outstanding capital stock of Containers and Plastics.

12

Since its origin in 1987, the Company has completed the following
acquisitions:

Acquired Business Year Products
----------------- ---- --------
Nestle's metal container manufacturing 1987 Metal food containers
division
Monsanto Company's plastic container 1987 Plastic containers
business
Fort Madison Can Company of Dial 1988 Metal food containers
Seaboard Carton Division of Nestle 1988 Paper 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's U.S. can manufacturing operations 1993 Metal food containers
Food Metal and Specialty business of ANC 1995 Metal food containers,
metal caps and closures
and Omni plastic containers
Finger Lakes Packaging Company, Inc. 1996 Metal food containers
("Finger Lakes"), a subsidiary of Agrilink
Alcoa's North American aluminum roll-on 1997 Aluminum roll-on closures
closure business
Rexam's North American plastic container 1997 Plastic containers and
business("Rexam Plastics") closures
Winn Packaging Co. 1998 Plastic containers
Campbell's steel container manufacturing 1998 Metal food containers
business
Clearplass Containers, Inc. 1998 Plastic containers

Recent Developments

On August 1, 1998, the Company acquired Clearplass, a manufacturer of
rigid PET plastic containers primarily serving the personal care and
pharmaceutical industries with sales of approximately $23 million in its fiscal
year ending June 30, 1998. Clearplass' facilities are located in Penn Yan, New
York; Sheffield, Alabama; and Albia, Iowa.

On June 1, 1998, the Company completed its acquisition of CS Can, which
has assets in Campbell's food processing facilities in Maxton, North Carolina;
Napoleon, Ohio; Paris, Texas; and Sacramento, California. As part of the
transaction, the Company and Campbell entered into the Campbell Supply
Agreement. Annual sales to Campbell under the Campbell Supply Agreement are
expected to be in excess of $200 million. See "--Sales and Marketing."

On January 1, 1998, Plastics acquired substantially all of the assets
of Winn, a private manufacturer of rigid plastic containers serving the personal
care, automotive and household chemical markets with estimated sales of
approximately $23 million in 1997. As part of the transaction, Plastics leased
Winn's facility in Fairfield, Ohio.

The Company financed its 1998 acquisitions with revolving loan
borrowings under its U.S. bank credit agreement. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Financial
Strategy" and "--Capital Resources and Liquidity."

13

Item 2. Properties

Holdings' principal executive offices are located at 4 Landmark Square,
Stamford, Connecticut 06901. The administrative headquarters and principal
places of business for the Company's metal food container, plastic container and
specialty packaging businesses are located at 21800 Oxnard Street, Woodland
Hills, California 91367; 14515 N. Outer Forty, Chesterfield, Missouri 63017; and
9700 West Higgins Road, Rosemont, Illinois 60018, respectively. All of these
offices are leased by the Company.

The Company owns and leases properties for use in the ordinary course
of business. Such properties consist primarily of 36 metal food container, 19
plastic container and 5 specialty packaging manufacturing facilities.
Twenty-four of these facilities are owned and 36 are leased by the Company. The
leases expire at various times through 2020. Some of these leases provide
renewal options as well as various purchase options.

Below is a list of the Company's operating facilities, including
attached warehouses, as of March 1, 1999 for its metal food container business:

Approximate Building Area
Location (square feet)
-------- -------------

Tarrant, AL............................ 89,100 (leased)
City of Industry, CA................... 70,000 (leased)
Kingsburg, CA.......................... 35,600 (leased)
Modesto, CA............................ 37,800 (leased)
Modesto, CA............................ 128,000 (leased)
Modesto, CA............................ 150,000 (leased)
Riverbank, CA.......................... 167,000
Sacramento, CA......................... 284,900 (leased)
San Leandro, CA........................ 73,000 (leased)
Stockton, CA........................... 243,500
Hoopeston, IL.......................... 323,000
Rochelle, IL........................... 175,000
Waukegan, IL........................... 40,000 (leased)
Hammond, IN............................ 158,000 (leased)
Laporte, IN............................ 144,000 (leased)
Fort Madison, IA....................... 65,000
Ft. Dodge, IA.......................... 155,200 (leased)
Benton Harbor, MI...................... 20,250 (leased)
Savage, MN............................. 160,000
St. Paul, MN........................... 470,000
Mt. Vernon, MO......................... 100,000
Northtown, MO.......................... 111,700 (leased)
St. Joseph, MO......................... 173,700
Maxton, NC............................. 231,800 (leased)
Edison, NJ............................. 260,000
Lyons, NY.............................. 149,700
Napoleon, OH........................... 339,600 (leased)
Crystal City, TX....................... 26,000 (leased)
Paris, TX.............................. 266,300 (leased)
Toppenish, WA.......................... 105,000
Vancouver, WA.......................... 127,000 (leased)
Menomonee Falls, WI.................... 116,000
Menomonie, WI.......................... 187,500 (leased)
Oconomowoc, WI......................... 105,200
Plover, WI............................. 91,400 (leased)
Waupun, WI............................. 212,000

14

Below is a list of the Company's operating facilities, including
attached warehouses, as of March 1, 1999 for its plastic container business:

Approximate Building Area
Location (square feet)
-------- -------------

Sheffield, AL.......................... 20,200 (leased)
Anaheim, CA............................ 127,000 (leased)
Deep River, CT......................... 140,000
Monroe, GA............................. 139,600
Norcross, GA........................... 59,000 (leased)
Flora, IL.............................. 56,400
Ligonier, IN........................... 469,000 (276,000 leased)
Seymour, IN............................ 406,000
Albia, IA.............................. 53,000 (leased)
Franklin, KY........................... 122,000 (leased)
Penn Yan, NY........................... 100,000
Fairfield, OH.......................... 185,000 (leased)
Port Clinton, OH....................... 257,400 (leased)
Langhorne, PA.......................... 156,000 (leased)
Mississauga, Ontario................... 75,000 (leased)
Mississauga, Ontario................... 62,600 (leased)
Scarborough, Ontario................... 117,000
Lachine, Quebec........................ 113,300 (leased)
Lachine, Quebec........................ 77,820 (leased)

Below is a list of the Company's operating facilities, including
attached warehouses, as of March 1, 1999 for its specialty packaging business:

Approximate Building Area
Location (square feet)
-------- -------------

Norwalk, CT............................ 14,400 (leased)
Broadview, IL.......................... 85,000
Woodstock, IL.......................... 186,650 (leased)
Evansville, IN......................... 188,000
Richmond, IN........................... 462,000

The Company owns and leases certain other warehouse facilities that are
detached from its manufacturing facilities. All of the Company's U.S. facilities
are subject to liens in favor of the banks under its U.S. bank credit agreement,
and all of the Company's Canadian facilities are subject to liens in favor of
the banks under the Company's Canadian bank credit agreement.

The Company believes that its plants, warehouses and other facilities
are in good operating condition, adequately maintained, and suitable to meet its
present needs and future plans. The Company believes that it has sufficient
capacity to satisfy the demand for its products in the foreseeable future. To
the extent that the Company needs additional capacity, management believes that
the Company can convert certain facilities to continuous operation or make the
appropriate capital expenditures to increase capacity.

Item 3. Legal Proceedings

There are no material pending legal proceedings to which the Company is
a party or to which any of its properties are subject.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

15

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

The Common Stock has been quoted on the Nasdaq National Market System
since February 14, 1997 under the symbol SLGN. As of March 1, 1999, there were
approximately 87 holders of record of the Common Stock. Holdings has never
declared or paid cash dividends on its Common Stock. Holdings currently
anticipates that it will retain all available funds for use in the operation and
expansion of its business and does not anticipate paying any cash dividends on
its Common Stock in the foreseeable future. Any future determination to pay cash
dividends will be at the discretion of Holdings' Board of Directors and will be
dependent upon Holdings' consolidated results of operations and financial
condition, applicable contractual restrictions and other factors deemed relevant
by Holdings' Board of Directors. The Company's U.S. bank credit agreement and
indentures for its 9% Senior Subordinated Debentures due 2009 (the "9%
Debentures") and 13-1/4% Subordinated Debentures due 2006 (the "Exchange
Debentures") allow Holdings to pay dividends on its Common Stock up to specified
limits. The following table sets forth the high and low closing sales prices of
Holdings' Common Stock as reported by the Nasdaq National Market System for the
periods indicated below.

High Low
---- ---
1997
----
First Quarter (beginning February 14, 1997).... $26.000 $22.250
Second Quarter................................. 38.750 24.750
Third Quarter.................................. 41.500 36.625
Fourth Quarter................................. 40.000 28.750

High Low
---- ---
1998
----
First Quarter.................................. $35.750 $27.375
Second Quarter................................. 36.000 28.000
Third Quarter.................................. 27.875 20.250
Fourth Quarter................................. 28.000 20.000

Item 6. Selected Financial Data

Set forth below are selected historical consolidated financial data of
the Company at December 31, 1998, 1997, 1996, 1995 and 1994 and for the years
then ended.

The selected historical consolidated financial data of the Company at
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998 were derived from the historical consolidated financial
statements of the Company for such periods that were audited by Ernst & Young
LLP, independent auditors, whose report appears elsewhere in this Annual Report
on Form 10-K. The selected historical consolidated financial data of the Company
at December 31, 1996, 1995, and 1994 and for the years ended December 31, 1995
and 1994 were derived from the historical audited consolidated financial
statements of the Company for such periods.

The selected historical consolidated financial data of the Company
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical financial
statements of the Company, including the notes thereto, included elsewhere in
this Annual Report on Form 10-K.

16

Selected Financial Data

Year Ended December 31,
-----------------------
1998(a) 1997 1996 1995(b) 1994
------- ---- ---- ------- ----
(Dollars in millions, except per share data)

Operating Data:
Net sales ............................................. $1,738.7 $1,511.4 $1,405.7 $1,101.9 $ 861.4
Cost of goods sold .................................... 1,516.3 1,303.5 1,221.9 970.5 748.3
-------- -------- -------- -------- --------
Gross profit .......................................... 222.4 207.9 183.8 131.4 113.1
Selling, general and administrative expenses .......... 68.1 60.8 60.5 46.9 38.0
Non-cash stock option charge (c) ...................... -- 22.5 -- -- --
Reduction in carrying value of assets (d) ............. -- -- -- 14.7 16.7
-------- -------- -------- -------- --------
Income from operations ................................ 154.3 124.6 123.3 69.8 58.4
Interest expense and other related financing costs .... 81.5 80.7 89.4 80.7 65.8
-------- -------- -------- -------- --------
Income (loss) before income taxes ..................... 72.8 43.9 33.9 (10.9) (7.4)
Income tax provision (benefit) (e) ................... 26.9 (6.7) 3.3 5.1 5.6
-------- -------- -------- -------- --------
Income (loss) before extraordinary charges ............ 45.9 50.6 30.6 (16.0) (13.0)
Extraordinary charges relating to early
extinguishment of debt ........................... -- 16.4 2.2 5.8 --
-------- -------- -------- -------- --------
Net income (loss) before preferred stock dividend
requirement ...................................... 45.9 34.2 28.4 (21.8) (13.0)
Preferred stock dividend requirement .................. -- 3.2 3.0 -- --
-------- -------- -------- -------- --------
Net income (loss) applicable to common shareholders... $ 45.9 $ 31.0 $ 25.4 $ (21.8) $ (13.0)
======== ======== ======== ======== ========
Basic earnings per common share:
Income (loss) before extraordinary charges ......... $ 2.41 $ 2.75 $ 1.75 $ (0.82) $ (0.67)
Extraordinary charges .............................. -- (0.89) (0.13) (0.30) --
Preferred stock dividend requirement ............... -- (0.18) (0.17) -- --
-------- -------- -------- -------- --------
Net income (loss) per common share ............... $ 2.41 $ 1.68 $ 1.45 $ (1.12) $ (0.67)
======== ======== ======== ======== ========
Diluted earnings per common share:
Income (loss) before extraordinary charges ......... $ 2.30 $ 2.56 $ 1.65 $ (0.82) $ (0.67)
Extraordinary charges .............................. -- (0.83) (0.12) (0.30) --
Preferred stock dividend requirement ............... -- (0.16) (0.16) -- --
-------- -------- -------- -------- --------
Net income (loss) per diluted common share ......... $ 2.30 $ 1.57 $ 1.37 $ (1.12) $ (0.67)
======== ======== ======== ======== ========
Selected Segment Data:
Net sales:
Metal food container business ...................... $1,299.0 $1,134.5 $1,098.6 $ 845.5 $ 647.5
Plastic container business ......................... 310.9 263.3 216.4 219.6 204.3
Specialty packaging business ....................... 128.8 113.6 90.7 36.8 9.6
Income (loss) from operations (f):
Metal food container business ...................... 116.1 118.5 95.6 54.8 58.1
Plastic container business ......................... 38.0 28.5 18.4 13.2 (0.1)
Specialty packaging business ....................... 3.3 1.9 10.5 3.4 1.7

Other Data:
Adjusted EBITDA (g) ................................... $ 231.8 $ 210.5 $ 181.6 $ 128.9 $ 113.4
Capital expenditures .................................. 86.1 62.2 56.9 51.9 29.2
Depreciation and amortization (h) ..................... 77.5 63.4 57.5 43.6 36.8
Cash flows provided by operating activities ........... 147.4 117.9 125.2 209.6 47.3
Cash flows used in investing activities ............... (278.3) (100.5) (98.3) (397.1) (27.9)
Cash flows provided by (used in) financing activities.. 82.0 35.3 (27.9) 186.9 (17.0)

Balance Sheet Data (at end of period):
Total assets .......................................... $1,224.0 $1,050.6 $ 913.5 $ 900.0 $ 504.3
Total debt ............................................ 927.0 805.3 760.0 786.1 545.3
Redeemable preferred stock ............................ -- -- 53.0 -- --
Deficiency in stockholders' equity .................... (57.3) (67.3) (191.0) (180.6) (158.9)

(footnotes follow)

17

Notes to Selected Financial Data

(a) On June 1, 1998, the Company acquired CS Can. The acquisition was accounted
for as a purchase transaction and the results of operations have been
included with the Company's historical results from the acquisition date.
See Note 2 to the Consolidated Financial Statements for the year ended
December 31, 1998 included elsewhere in this Annual Report on Form 10-K.

(b) On August 1, 1995, the Company acquired AN Can. The acquisition was
accounted for as a purchase transaction and the results of operations have
been included with the Company's historical results from the acquisition
date.

(c) In connection with Holdings' initial public offering of its Common Stock in
February 1997 (the "IPO"), the Company recognized a non-cash charge of
$22.5 million at the time of the IPO for the excess of the fair market
value over the grant price of certain stock options, less $3.7 million
previously accrued. See Note 12 to the Consolidated Financial Statements
for the year ended December 31, 1998 included elsewhere in this Annual
Report on Form 10-K.

(d) Based upon a review of its depreciable assets, in 1995 and 1994 the Company
determined that certain adjustments were necessary to properly reflect net
realizable values. In 1995, the metal food container business recorded a
write-down of $14.7 million for the excess of carrying value over estimated
realizable value of machinery and equipment at existing facilities which
had become underutilized due to excess capacity. In 1994, charges of $7.2
million and $9.5 million were recorded by the metal food container business
and plastic container business, respectively, to write-down the excess
carrying value over estimated realizable value of various plant facilities
held for sale and for technologically obsolete and inoperable machinery and
equipment.

(e) During 1997, the Company determined that a portion of the future tax
benefits arising from its net operating loss carryforward would be realized
in future years due to the Company's continued improvement in earnings and
increased probability of future taxable income. Accordingly, in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 109, the
Company recognized an income tax benefit for its recoverable net operating
loss carryforward. See Note 10 to the Consolidated Financial Statements for
the year ended December 31, 1998 included elsewhere in this Annual Report
on Form 10-K.

(f) Income (loss) from operations in the selected segment data includes charges
incurred for the reduction in carrying value of certain assets for the
metal food container business of $14.7 million and $7.2 million for the
years ended December 31, 1995 and 1994, respectively, and for the plastic
containers business of $9.5 million for the year ended December 31, 1994,
as referred to in footnote (d) above. Income (loss) from operations in the
selected segment data excludes the non-cash stock option charge of $22.5
million incurred as a result of the IPO, as referred to in footnote (c)
above, and corporate expense.

(g) "Adjusted EBITDA" means consolidated net income before extraordinary
charges and preferred stock dividends plus, to the extent reflected in the
income statement for the applicable period, without duplication,
consolidated interest expense, income tax expense and depreciation and
amortization expense, as adjusted to add back the reduction in carrying

18

value of assets (which were $14.7 million and $16.7 million for the years
ended December 31, 1995 and 1994, respectively) and certain other non-cash
charges (which included a charge of $22.5 million incurred in 1997 in
connection with the IPO as referred to in footnote (c) above and charges
relating to the vesting of benefits under stock appreciation rights of $0.8
million for each of the years ended December 31, 1996 and 1995 and $1.5
million for the year ended December 31, 1994). The Company has included
information regarding Adjusted EBITDA because management believes that many
investors consider it to be important in assessing a company's ability to
service and incur debt. Accordingly, this information has been disclosed
herein to permit a more complete analysis of the Company's financial
condition. Adjusted EBITDA should not be considered in isolation or as a
substitute for net income or other consolidated statement of operations or
cash flows data prepared in accordance with Generally Accepted Accounting
Principles ("GAAP") as a measure of the profitability or liquidity of the
Company. See the consolidated statements of operations and consolidated
statements of cash flows of the Company, including the notes thereto,
included elsewhere in this Annual Report on Form 10-K. Adjusted EBITDA does
not take into account the Company's debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts that
may be available for discretionary uses. Additionally, Adjusted EBITDA is
not computed in accordance with GAAP and may not be comparable to other
similarly titled measures of other companies.

(h) Depreciation and amortization excludes amortization of debt financing costs.

19

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

The following discussion and analysis is intended to assist in an
understanding of the Company's consolidated financial condition and results of
operations for the three-year period ended December 31, 1998. The Company's
consolidated financial statements and the notes thereto included elsewhere in
this Annual Report on Form 10-K contain detailed information that should be
referred to in conjunction with the following discussion and analysis.

General

The Company is a leading North American manufacturer of consumer goods
packaging products that currently produces (i) steel and aluminum containers for
human and pet food, (ii) custom designed plastic containers for personal care,
health, food, pharmaceutical and household detergent and chemical products and
(iii) specialty packaging items used in the food and beverage industries,
including steel caps and closures, aluminum roll-on closures, plastic bowls,
plastic cans and paperboard containers. The Company is the largest manufacturer
of metal food containers in North America, with a pro forma unit sale market
share for the year ended December 31, 1998 of 46% in the United States, a
leading manufacturer of plastic containers in North America for personal care
products and a major supplier of metal closures for food and beverage products.
See "Business--General."

Revenue Growth

The Company's strategy is to increase shareholder value by growing its
existing businesses and expanding into other segments by applying its expertise
in acquiring, financing, integrating and efficiently operating consumer goods
packaging businesses. The Company has increased its revenues and market share in
the metal food container, plastic container and specialty packaging markets
through acquisitions and internal growth. As a result of this strategy, the
Company has diversified its customer base, geographic presence and product line.

Management believes that certain industry trends exist which will
enable the Company to continue to acquire attractive businesses in its existing
markets. For example, during the past eleven years, the metal food container
market has experienced significant consolidation due to the desire by food
processors to reduce costs and focus resources on their core operations. The
Company's acquisitions of the metal food container manufacturing operations of
Nestle, Dial, Del Monte, Agrilink and, most recently, Campbell reflect this
trend. During this period, the Company's overall share of the U.S. metal food
container market more than quadrupled, from approximately 10% to approximately
46% in 1998 on a pro forma basis after giving effect to the acquisition of CS
Can as if it had occurred on January 1, 1998. See "Business--General--Growth
Strategy."

The Company's plastic container business has also increased its market
position from a sales base of $88.8 million in 1987 to $310.9 million in 1998
through strategic acquisitions and, to a lesser extent, through internal growth.
The plastic container segment of the consumer goods packaging industry is highly
fragmented, and management intends to pursue consolidation opportunities in that
segment as evidenced by its recent acquisitions of Clearplass and Winn. See
"Business--General--Growth Strategy."

Management believes that it can successfully apply its acquisition and
operating expertise to new segments of the consumer goods packaging industry.
For example, with the Roll-on Closures and AN Can acquisitions, the Company
expanded its specialty packaging business into aluminum roll-on closures, steel
caps and closures and its licensed Omni plastic container. Management believes
that certain trends in and characteristics of the North American consumer goods

20

packaging industry will continue to generate attractive acquisition
opportunities in complementary business lines. Importantly, the industry is
fragmented, with numerous segments and multiple participants in the various
segments. Many of these segments are experiencing consolidation. See
"Business--General--Growth Strategy."

Operating Strategy

The Company seeks to acquire businesses at reasonable cash flow
multiples and to enhance profitability through productivity and cost reduction
opportunities. The additional sales and production capacity provided through
acquisitions have enabled the Company to rationalize plant operations and
decrease overhead costs through plant closings and downsizings. In addition, the
Company's acquisitions have enabled it to realize manufacturing efficiencies as
a result of optimizing production scheduling and minimizing product
transportation costs. The Company has also benefited from the economies of its
increased purchasing volume and from the elimination of redundant selling and
administrative functions, as well as from the investment of capital to upgrade
the acquired facilities. See "Business--General--Growth Strategy--Enhance
Profitability of Acquired Companies."

Historically, the Company has been able to improve its operating
margins through productivity and cost reduction opportunities provided by its
acquisitions. Following an acquisition, the Company will initiate a systematic
program, which usually will be implemented over a number of years, to optimize
its manufacturing facilities. As a result, this improvement to operating margins
generally has been realized over a number of years. See "--Capital Resources and
Liquidity."

In addition to the benefits realized through the integration of
acquired businesses, the Company has improved the operating performance of its
existing plant facilities through the investment of capital for productivity
improvements and manufacturing cost reductions. Over the past five years, the
Company has made $286.3 million in capital investments to improve its
productivity, to reduce its manufacturing costs and to invest in new market
opportunities.

For the period from 1995 through 1997, the Company's operating margins
(excluding the effect of non-cash charges) improved from 7.7% to 9.7% as a
result of benefits realized from its plan to integrate AN Can and from the
investment of capital for productivity improvements. In 1998, however, the
Company's operating margins declined to 8.9% principally because the overall
margin on sales to Campbell was less than the average margin for the Company's
existing business.

The Company operates in a competitive industry where it is necessary
to realize cost reduction opportunities to offset continued competitive pricing
pressure. Further, the multi-year supply arrangements entered into by the
Company's metal food container businss with many of its customers, including
Nestle, Del Monte, Campbell and several other major food producers, limit the
Company's ability to increase its margins. The Company estimates that
approximately 80% of its projected metal food container sales in 1999 will be
pursuant to such arrangements. These multi-year supply arrangements generally
provide, however, for the pass through of material and labor cost changes,
thereby significantly reducing the exposure of the Company's results of
operations to the volatility of these costs. See "Business--Raw Materials."

Historically, the Company has been successful in continuing its
multi-year supply arrangements with its customers, without any resulting
material adverse effect on its financial condition or results of operations.
There can be no assurance, however, that in the future the Company will retain
these multi-year supply arrangements or, if the Company continues these
arrangements, that they will be continued without any material adverse effect on
its financial condition or results of operations. In November 1998, the Company
and Del Monte agreed to extend the term of the DM Supply Agreement by three
years until December 21, 2006 in return for certain price reductions which went
into effect in 1999. The Company believes that these price reductions, while
significant, will not have a material adverse effect on its financial condition
or results of operations. See "--Financial Strategy."

21

The Company believes that in 1999 the benefits to its operating
margins realized from its cost reduction initiatives and capital investments are
likely to offset the impact of the price reductions associated with the
extension of the DM Supply Agreement and the lower average margin sales to
Campbell.

The Company's metal food container business sales and, to a lesser
extent, operating income are dependent, in part, upon the vegetable, tomato and
fruit harvests in the midwest and western regions of the United States. 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, the Company has historically experienced higher unit sales volume in
the second and third quarters of its fiscal year and generated a
disproportionate amount of its annual income from operations during these
quarters. The Company believes that this seasonal impact will be mitigated
somewhat by the acquisition of CS Can. Management believes that sales to
Campbell generally will be highest in the first and fourth quarters due to the
seasonal demand for soup products.

Financial Strategy

The Company's financial strategy is to use leverage to support its
growth and increase shareholder returns. The Company's stable and predictable
cash flow, generated largely as a result of its long-term customer relationships
and generally recession resistant business, supports its financial strategy.

As the Company's revenues and operating income have increased and the
Company's financial position has improved, the Company refinanced substantially
all of its indebtedness in 1997 and 1996 with lower cost indebtedness and equity
to further improve its cash flow and operating and financial flexibility. In
addition to reducing the Company's borrowing costs and extending the maturities
of its debt, the Company's refinancings improved its flexibility to engage in
mergers and acquisitions, make capital expenditures, incur additional
indebtedness, pay dividends, repurchase stock and refinance existing
indebtedness. Furthermore, the Company's secured credit facilities provide it
with revolving loan facilities of $550.0 million, which are available to the
Company to provide for seasonal working capital needs and to pursue its growth
strategy or for other permitted purposes. See "--Capital Resources and
Liquidity." During 1998, the Company used $234.4 million of its revolving loan
facilities to finance its acquisitions of Winn, CS Can and Clearplass and to
repurchase approximately $43.4 million of its Common Stock.

Even though the Company incurred additional indebtedness in 1998 to
finance acquisitions and Common Stock repurchases, the Company's aggregate
financing costs (interest expense and preferred stock dividend requirements) in
1998 declined approximately $2.5 million from 1997 and $10.9 million from 1996.
These reductions reflected the benefit of the Company's 1997 and 1996
refinancings. See "--Capital Resources and Liquidity."

To the extent the Company utilizes its revolving loan facilities for
acquisitions, stock repurchases or other permitted purposes in future periods,
its interest expense may increase. Further, since the Company's financial
results are sensitive to changes in prevailing rates of interest, its interest
expense may vary from period to period. The Company's revolving loan and term
loan borrowings under its secured credit facilities bear interest at floating
rates. After taking into account interest rate swap arrangements that the
Company entered into to mitigate the effect of interest rate fluctuations, at
December 31, 1998 the Company had $367.8 million of indebtedness which bore
interest at floating rates. See "--Effect of Inflation and Interest Rate
Fluctuations" and "Quantitative and Qualitative Disclosure About Market
Risk--Interest Rate Risk."

22

In light of the Company's strategy to use leverage to support its
growth and optimize shareholder returns, the Company has incurred and will
continue to incur significant interest expense. For 1998, the Company's
aggregate financing costs were 52.8% of its income from operations as compared
to 67.4% and 74.9% for 1997 and 1996, respectively. Due to the Company's
significant interest expense, events such as price reductions given to customers
in exchange for term extensions or other modifications to existing supply
arrangements, as was agreed to with Del Monte for 1999, that are not material to
the Company's income from operations could have a significant impact on its net
income.

In 1998, the Company acquired Winn, CS Can and Clearplass, and
financed the entire purchase price for these acquisitions with revolving loan
borrowings under its U.S. bank credit facility and with other indebtedness.
These acquisitions were slightly accretive to the Company's 1998 earnings per
share, as their operating income was largely offset by interest expense on the
indebtedness used to finance them. Consistent with the Company's strategy to
acquire businesses at reasonable cash flow multiples, management believes that
the cash flow generated from these acquisitions will reduce the indebtedness
used to finance them and the related interest expense. In addition, management
believes that it will be able to enhance the profitability of these acquisitions
through cost reduction opportunities and capital investment, although there can
be no assurance that their profitability will be enhanced.

To further enhance shareholder value, in 1998 the Company's Board of
Directors authorized the repurchase by the Company of up to $60 million of its
Common Stock. In 1998, the Company repurchased $43.4 million of its Common Stock
(1,707,003 shares), and funded such repurchases with revolving loan borrowings
from its US. bank credit facility. Because such repurchases occurred in the
second half of 1998, they did not have a significant impact on the Company's
earnings per share in 1998. In 1999, the Company expects that such repurchases
will be accretive to the Company's earnings per share. See "--Capital Resources
and Liquidity."

Results of Operations

The following table sets forth certain income statement data for the
Company, expressed as a percentage of net sales, for each of the periods
presented, and should be read in conjunction with the consolidated financial
statements of the Company and related notes thereto included elsewhere in this
Annual Report on Form 10-K.

23

Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----

Operating Data:
Net sales:
Metal food container business .................................. 74.7% 75.1% 78.1%
Plastic container business ..................................... 17.9 17.4 15.4
Specialty packaging business ................................... 7.4 7.5 6.5
----- ----- -----
Total ....................................................... 100.0 100.0 100.0
Cost of goods sold ............................................... 87.2 86.2 86.9
----- ----- -----
Gross Profit ..................................................... 12.8 13.8 13.1
Selling, general and administrative expenses ..................... 3.9 4.0 4.3
Non-cash stock option charge ..................................... -- 1.5 --
----- ----- -----
Income from operations ........................................... 8.9 8.3 8.8
Interest expense and other related financing costs ............... 4.7 5.4 6.4
----- ----- -----
Income before income taxes ....................................... 4.2 2.9 2.4
Income tax provision (benefit) ................................... 1.6 (0.5) 0.2
----- ----- -----
Income before extraordinary charges .............................. 2.6 3.4 2.2
Extraordinary charges relating to early extinguishment of debt ... -- 1.1 0.2
----- ----- -----
Net income before preferred stock dividend requirement ........... 2.6 2.3 2.0
Preferred stock dividend requirement ............................. -- 0.2 0.2
----- ----- -----
Net income applicable to common stockholders .................... 2.6% 2.1% 1.8%
===== ===== =====

Summary historical results for the Company's three business segments,
metal food containers, plastic containers and specialty packaging, for the
calendar years ended December 31, 1998, 1997, and 1996 are provided below.

Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----

(Dollars in millions)

Net sales:
Metal food container business ............ $1,299.0 $1,134.5 $1,098.6
Plastic container business ............... 310.9 263.3 216.4
Specialty packaging business ............. 128.8 113.6 90.7
-------- -------- --------
Consolidated .......................... $1,738.7 $1,511.4 $1,405.7
======== ======== ========

Income from operations:
Metal food container business ............ $ 116.1 $ 118.5 $ 95.6
Plastic container business ............... 38.0 28.5 18.4
Specialty packaging business ............. 3.3 1.9 10.5
Non-cash stock option charge(1) .......... -- (22.5) --
Corporate expense ........................ (3.1) (1.8) (1.2)
-------- -------- --------
Consolidated .......................... $ 154.3 $ 124.6 $ 123.3
======== ======== ========
- ------------

(1) In connection with the IPO, the Company recognized a non-cash charge of
$22.5 million for the excess of the fair market value over the grant price
of stock options converted from stock option plans of Holdings'
subsidiaries to Holdings' stock option plan at the time of the IPO. See
Note 12 to the Company's Consolidated Financial Statements for the year
ended December 31, 1998 included elsewhere in this Annual Report on Form
10-K.

24

Historical Year Ended December 31, 1998 Compared with Historical Year Ended
December 31, 1997

Net Sales. Consolidated net sales increased $227.3 million, or 15.0%,
to $1,738.7 million for the year ended December 31, 1998, as compared to net
sales of $1,511.4 million for the same period in 1997. This increase was
principally a result of incremental sales from acquisitions.

Net sales for the metal food container business were $1,299.0 million
for the year ended December 31, 1998, an increase of $164.5 million, or 14.5%,
from net sales of $1,134.5 million for the same period in 1997. This increase
resulted principally from sales to Campbell under the Campbell Supply Agreement
entered into in June 1998.

Net sales for the plastic container business of $310.9 million during
the year ended December 31, 1998 increased $47.6 million, or 18.1%, from net
sales of $263.3 million for the same period in 1997. The increase in net sales
was attributable to incremental sales added by its acquisitions of Winn and
Clearplass in 1998 and Rexam Plastics in April 1997 and to higher unit volume
from the existing business.

Net sales for the specialty packaging business increased $15.2 million,
or 13.4%, to $128.8 million during the year ended December 31, 1998, as compared
to $113.6 million for the same period in 1997. This increase resulted from the
inclusion of a full year of sales from Roll-on Closures which was acquired in
April 1997, as well as an increase in sales to existing customers.

Cost of Goods Sold. Cost of goods sold as a percentage of consolidated
net sales was 87.2% ($1,516.3 million) for the year ended December 31, 1998, an
increase of 1.0 percentage point as compared to 86.2% ($1,303.5 million) for the
same period in 1997. The decline in the gross profit margin was principally
attributable to the effect of lower margin sales to Campbell and slightly lower
margins realized by the existing metal food container business, offset in part
by higher margins realized by the plastic container business.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of consolidated net sales decreased 0.1
percentage points to 3.9% ($68.2 million) for the year ended December 31, 1998,
as compared to 4.0% ($60.8 million) for the year ended December 31, 1997. The
improvement in selling, general and administrative expenses as a percentage of
net sales principally related to increased revenues generated from the recent
acquisitions without a commensurate increase in selling, general and
administrative costs.

Income from Operations. Income from operations as a percentage of
consolidated net sales for the year ended December 31, 1998 improved to 8.9%
($154.3 million), as compared to 8.3% ($124.6 million) for 1997. However, after
excluding the non-cash stock option charge of $22.5 million incurred in
connection with the IPO, 1997 operating margins as percentage of net sales would
have been 9.7%. The decline in operating margins in 1998 as compared to 1997, as
adjusted to exclude the IPO charge, was principally attributable to lower
margins realized by the metal food container business, offset in part by the
improved operating performance of the plastic container business.

25

At the time of the IPO in February 1997, stock options issued under the
stock option plans of Holdings' subsidiaries were converted to stock options of
Holdings. In accordance with generally accepted accounting principles, the
Company recorded a charge of $22.5 million for the excess of the fair market
value of the stock options issued under the subsidiary stock option plans over
the grant price of the options. The Company does not expect to recognize any
future charges for these stock options.

Income from operations as a percentage of net sales for the metal food
container business decreased 1.5 percentage points to 8.9% ($116.1 million) for
the year ended December 31, 1998, as compared to 10.4% ($118.5 million) for the
same period in 1997. The decrease in income from operations as a percentage of
net sales for the metal food container business principally resulted from lower
margin sales to Campbell, an increase in depreciation expense, and price
reductions provided to certain metal food container customers in exchange for
contract extensions, and was offset in part by the benefit of plant
rationalizations realized from the AN Can acquisition.

Income from operations as a percentage of net sales for the plastic
container business improved 1.4 percentage points to 12.2% ($38.0 million) for
the year ended December 31, 1998, as compared to 10.8% ($28.5 million) for the
same period in 1997. The improvement in the operating performance of the plastic
container business was principally attributable to an increase in unit sales to
existing customers, resulting in slightly lower per unit production costs.

Income from operations as a percentage of net sales for the specialty
packaging business improved 1.0 percentage point to 2.6% ($3.3 million) for the
year ended December 31, 1998, as compared to 1.6% ($1.9 million) for the same
period in 1997. Income from operations as a percentage of net sales for the
specialty packaging business improved in 1998 as compared to 1997 despite an
increase in new product development expenditures of $1.0 million to $2.7 million
during the year.

Interest Expense. Interest expense increased $0.8 million to $81.5
million for the year ended December 31, 1998, as compared to $80.7 million in
1997. The increase in interest expense during 1998 was a result of the
incurrence of additional indebtedness to finance acquisitions and the repurchase
of Common Stock, offset in part by lower average borrowing rates. During 1998,
the Company recognized the full year benefit of its 1997 refinancings and
benefited from slightly lower bank borrowing rates as compared to 1997.

Income Taxes. The provision for income taxes of $26.9 million for the
year ended December 31, 1998 was recorded at an effective rate of 37%. For the
year ended December 31, 1997, the Company recorded an income tax benefit of $6.7
million, which was realized through the release of the Company's valuation
allowance and was partially offset by a provision for income taxes recorded at
an effective tax rate of 38%. During 1997, the Company determined that it was
more likely than not that future tax benefits arising from its net operating
loss carryforwards would be realized in future years due to the Company's
continued improvement in earnings and the probability of future taxable income,
and therefore recognized an income tax benefit of $27.4 million.

Net Income and Earnings per Share. As a result of the matters
discussed above, net income for the year ended December 31, 1998 was $45.9
million, or $2.30 per diluted share, compared with $31.0 million, or $1.57 per
diluted share, for the year ended December 31, 1997. During 1997, the Company
incurred an extraordinary charge of $16.4 million, net of taxes, or $0.83 per
diluted share, for the write-off of unamortized debt financing costs and
premiums associated with the early redemption of the Company's 13-1/4% Senior
Discount Debentures due 2002 (the "Discount Debentures") and 11-3/4% Senior
Subordinated Notes due 2002 (the "11-3/4% Notes") and the refinancing of the
Company's previous U.S. bank credit agreement. Before the extraordinary charge
and the preferred stock dividend requirement, earnings per diluted share were
$2.56 in 1997.

The Company estimates that 1997 earnings would have been $38.6 million,
or $1.96 per diluted share, if unusual items for the non-cash stock option
charge and the extraordinary charges incurred in connection with the refinancing
of the Company's debt obligations had been excluded from earnings and if
earnings for such period had been calculated using the effective tax rate for
the year ended December 31, 1998.

26

Historical Year Ended December 31, 1997 Compared with Historical Year Ended
December 31, 1996

Net Sales. Consolidated net sales increased $105.7 million, or 7.5%, to
$1,511.4 million for the year ended December 31, 1997, as compared to net sales
of $1,405.7 million for the same period in 1996. This increase resulted
primarily from additional sales generated by the Company's acquisitions in 1997
and its acquisition of Finger Lakes, which occurred in October 1996.

Net sales for the metal food container business were $1,134.5 million
for the year ended December 31, 1997, an increase of $35.9 million, or 3.3%,
from net sales of $1,098.6 million for the same period in 1996. This increase
resulted principally from sales generated through the acquisition of Finger
Lakes.

Net sales for the plastic container business of $263.3 million during
the year ended December 31, 1997 increased $46.9 million, or 21.7%, from net
sales of $216.4 million for the same period in 1996. The increase in net sales
was attributable to incremental sales generated by Rexam Plastics, which was
acquired in April 1997, and significantly higher volume from the existing
business.

Net sales for the specialty packaging business increased $22.9 million,
or 25.2%, to $113.6 million during the year ended December 31, 1997, as compared
to $90.7 million for the same period in 1996. This increase resulted from
additional revenues generated by Roll-on Closures which was acquired in April
1997, and was partially offset by lower unit sales to existing specialty
customers.

Cost of Goods Sold. Cost of goods sold as a percentage of consolidated
net sales was 86.2% ($1,303.5 million) for the year ended December 31, 1997, an
improvement of 0.7 percentage points as compared to 86.9% ($1,221.9 million) for
the same period in 1996. The improvement in the gross profit margin was
principally attributable to improved operating efficiencies achieved as a result
of benefits realized from the consolidation and integration of the AN Can
facilities, higher production volumes of the plastic container business and
capital investment, partially offset by the impact of competitive pricing
pressure on both the metal food container and the specialty packaging
businesses.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of consolidated net sales decreased 0.3
percentage points to 4.0% ($60.8 million) for the year ended December 31, 1997,
as compared to 4.3% ($60.5 million) for the year ended December 31, 1996. This
decrease in selling, general and administrative expenses as a percentage of net
sales principally related to increased revenues generated from acquisitions
without a commensurate increase in selling, general and administrative costs and
the expected lower administrative expenses realized as a result of the
completion of the integration of the administrative functions of AN Can with the
Company.

Income from Operations. Before consideration of the non-cash stock
option charge incurred in connection with the IPO, income from operations as a
percentage of consolidated net sales for the year ended December 31, 1997
improved 0.9 percentage points to 9.7% ($147.1 million), as compared to 8.8%
($123.3 million) for 1996. Including the non-cash stock option charge of $22.5
million, income from operations as a percentage of consolidated net sales was
8.3% ($124.6 million) for 1997.

Income from operations as a percentage of net sales for the metal food
container business improved 1.7 percentage points to 10.4% ($118.5 million) for
the year ended December 31, 1997, as compared to 8.7% ($95.6 million) for the
same period in 1996. The increase in income from operations as a percentage of
net sales for the metal food container business principally resulted from
improved operating efficiencies realized from plant consolidations, the benefit
of cost reductions provided by the Company's capital investment program and a
normalized production schedule in 1997 as compared to the negative impact of a
planned inventory reduction in 1996, offset in part by the impact of competitive
pricing pressure.

27

Income from operations as a percentage of net sales for the plastic
container business improved 2.3 percentage points to 10.8% ($28.5 million) for
the year ended December 31, 1997, as compared to 8.5% ($18.4 million) for the
same period in 1996. The improvement in the operating performance of the plastic
container business was principally attributable to both increased sales and
production volumes, which resulted in lower per unit manufacturing costs, and
continued manufacturing efficiencies due to capital investment benefits.

Income from operations as a percentage of net sales for the specialty
packaging business decreased 10.0 percentage points to 1.6% ($1.9 million) for
the year ended December 31, 1997, as compared to 11.6% ($10.5 million) for the
same period in 1996. The decrease in income from operations as a percentage of
net sales for the specialty packaging business related to a change in the mix of
products sold, higher selling, general and administrative expenses, the
acquisition of Roll-on Closures in April 1997 which operates at lower average
margins, an increase in costs associated with the development of new proprietary
closure technology, and competitive pricing pressure.

Interest Expense. Interest expense decreased $8.7 million to $80.7
million for the year ended December 31, 1997, as compared to $89.4 million in
1996. Since 1996, the Company has refinanced principally all of its indebtedness
with lower cost indebtedness and equity. The decline in interest expense
reflects the benefits of these refinancings, offset in part by additional
borrowing costs incurred to finance the purchases of Finger Lakes, Roll-on
Closures and Rexam Plastics.

Income Taxes. During 1997, the Company determined that it was more
likely than not that future tax benefits arising from its net operating loss
carryforwards would be realized in future years due to the Company's continued
improvement in earnings and the probability of future taxable income. As a
result, in accordance with SFAS No. 109, the Company released its valuation
allowance and recognized an income tax benefit of $27.4 million.

The net income tax benefit recorded for the year ended December 31,
1997 of $6.7 million reflects the benefit realized through the release of the
valuation allowance, partially offset by a provision for income taxes recorded
at an effective tax rate of 38%. Prior to 1997, the Company had not met the
criteria of SFAS No. 109 to release the valuation allowance and recorded its
provision for income taxes based upon federal, state and foreign taxes currently
payable.

Net Income and Earnings per Share. As a result of the matters discussed
above, net income for the year ended December 31, 1997 was $50.6 million (before
extraordinary charges of $16.4 million and the preferred stock dividend
requirement of $3.2 million), an increase of $20.0 million over net income for
the year ended December 31, 1996 of $30.6 million (before extraordinary charges
of $2.2 million and the preferred stock dividend requirement of $3.0 million).

Diluted earnings per share before extraordinary charges and preferred
stock dividend requirements for 1997 were $2.56, as compared with $1.65 for
1996. The Company estimates that 1997 earnings before the preferred stock
dividend requirement would have been $41.2 million, or $2.09 per diluted share,
as compared to $21.0 million, or $1.13 per diluted share, for 1996, if unusual
items for the non-cash stock option charge and the extraordinary charges
incurred in connection with the refinancing of the Company's debt obligations
had been excluded from earnings and if the provision for income taxes had been
calculated assuming an effective rate of 38%.

During 1997, the Company incurred an extraordinary charge of $16.4
million, net of tax, or $0.83 per diluted share, for the write-off of
unamortized debt costs and premiums paid associated with the early redemption of
the Company's debt obligations refinanced in 1997. In 1996, the Company incurred
an extraordinary charge of $2.2 million, net of tax, or $0.12 per diluted share,
for the write-off of unamortized deferred financing costs.

28

Capital Resources and Liquidity

The Company's liquidity requirements arise primarily from its
obligations under the indebtedness incurred in connection with its acquisitions
and the refinancing of such indebtedness, capital investment in new and existing
equipment and the funding of the Company's seasonal working capital needs.
Historically, the Company has met these liquidity requirements through cash flow
generated from operating activities and revolving loan borrowings.

During 1997 and 1996, the Company refinanced substantially all of its
indebtedness with lower cost indebtedness and equity to further improve its cash
flow and operating and financial flexibility. As a result, the Company
refinanced all of its Discount Debentures and 11-3/4% Notes and its higher cost
bank facility with (i) proceeds received from the IPO, (ii) the Company's 9%
Debentures, (iii) the Company's Exchange Debentures, and (iv) a lower cost bank
facility.

In July 1997, the Company completed the refinancing of its existing
bank facility by entering into a new U.S. senior secured credit facility. This
new credit facility provided the Company with a total senior secured credit
facility of $1.0 billion, which included $450.0 million of term loans and a
revolving loan facility of $550.0 million. Revolving loans are available to the
Company for its working capital and general corporate purposes (including
acquisitions and stock repurchases). In addition, the Company may request to
borrow up to an additional $200.0 million of revolving loans from one or more of
the lenders under the U.S. senior secured credit facility. The new U.S. senior
secured credit facility (i) lowered the interest rates on the Company's senior
secured borrowings, (ii) extended the maturities of the Company's A term loans
and revolving loans thereunder to December 31, 2003 and B term loans thereunder
to June 30, 2005, and (iii) changed certain covenants to further improve the
Company's operating and financial flexibility, including changes to provide more
flexibility to engage in mergers and acquisitions, make capital expenditures,
incur indebtedness, pay dividends, repurchase stock, and refinance existing
indebtedness.

In December 1997, the Company's Canadian subsidiaries entered into a
new secured credit facility to provide the Company with more financing
flexibility and reduce the Company's foreign currency exposure. The Canadian
credit facility provided such subsidiaries with approximately $18.5 million of
term loans and up to approximately $4.5 million of revolving loans. The term
loan proceeds were used to prepay $14.3 million and $4.2 million of term loans
under the U.S. senior secured credit facility in December 1997 and January 1998,
respectively. Additionally, as a result of the Canadian credit facility, the
revolving loan facility under the U.S. senior secured credit facility was
reduced by $4.5 million, the amount of the revolving loan commitment under the
Canadian credit facility, from $550.0 million to $545.5 million. Interest rates
for borrowings under the Canadian credit facility are generally comparable to
interest rates under the U.S. senior secured credit facility.

In 1998, cash generated from operations of $147.4 million, net
borrowings of revolving loans of $135.9 million under the Company's U.S. senior
secured credit facility, $4.2 million of borrowings under the Company's Canadian
credit facility, $3.0 million of other borrowings related to the acquisition of
CS Can, $2.3 million of proceeds from employee stock option exercises, $1.8
million of proceeds from asset sales, and $49.0 million of cash balances were
used to fund capital expenditures of $86.1 million, the acquisitions of Winn, CS
Can and Clearplass for an aggregate amount of $194.0 million, the repurchase of
Common Stock for $43.4 million, and the repayment of $20.1 million of bank term
loans.

During 1997, in implementing its refinancing strategy, the Company used
proceeds of $67.2 million from the IPO, proceeds of $300.0 million from the

29

issuance of the 9% Debentures, along with borrowings of $75.0 million under the
previous credit agreement, $450.0 million of term loans under the new U.S.
senior secured credit facility and $14.3 million of term loans under the
Canadian credit facility to redeem the remaining principal amount ($59.0
million) of the Discount Debentures, refinance $613.3 million of term loans
under the previous credit agreement, redeem the 11-3/4% Notes for $142.9 million
($135.0 million principal amount), repay $14.3 million of term loans under the
U.S. senior secured credit facility, and pay fees and expenses related to such
refinancings of $13.0 million.

For the year ended December 31, 1997, the Company used excess proceeds
of $64.0 million realized from the refinancings referred to above and cash
provided by operations of $117.9 million to repay $1.0 million principal amount
of term loans and $27.8 million of revolving loans under the previous credit
agreement, make capital expenditures of $57.6 million (net of asset sales), fund
the acquisitions of Roll-on Closures and Rexam Plastics for $42.8 million, and
increase its cash balance by $52.7 million.

During 1996, cash generated from operations of $125.2 million,
borrowings of $125.0 million of term loans under the previous credit agreement,
net proceeds of $47.8 million from the sale by Holdings of its preferred stock
(which has subsequently been exchanged for the Exchange Debentures), net
borrowings of revolving loans under the previous credit agreement of $20.7
million, proceeds of $1.6 million from the sale of assets, and $1.1 million of
cash balances were used to fund capital expenditures of $56.9 million, the
purchase of Finger Lakes for $29.9 million and the purchase of AN Can's St.
Louis facility for $13.1 million, the redemption of $154.4 million of Discount
Debentures, the repayment of $29.5 million of term loans under the previous
credit agreement, the payment of $1.8 million of financing costs associated with
the borrowing of additional term loans under the previous credit agreement, and
the purchase for $35.8 million of Holdings' Class B common stock held by Mellon
Bank N.A., as trustee for First Plaza Group Trust.

Because the Company sells metal containers used in fruit and vegetable
pack processing, it has seasonal sales. As is common in the industry, the
Company must access working capital to build inventory and then carry accounts
receivable for some customers beyond the end of the summer and fall packing
season. Seasonal accounts are generally settled by year end. Due to the
Company's seasonal requirements, the Company incurs short term indebtedness to
finance its working capital requirements.

The Company utilizes its revolving loan facilities for seasonal working
capital needs and for other general corporate purposes, including acquisitions
and repurchases of its Common Stock. For 1999, the Company estimates that at its
peak it will utilize approximately $175-$185 million of its revolving loan
facilities for seasonal working capital needs. As a result, after taking into
account outstanding revolving loans of $135.9 million at December 31, 1998, the
Company estimates that approximately $225-$235 million of its revolving loan
facilities is available to it in 1999 for acquisitions, repurchases of Common
Stock and other permitted purposes.

The Company financed its 1998 acquisitions of Winn, CS Can and
Clearplass through the revolving loan facility under its U.S. senior secured
credit facility. See "Business--Recent Developments." Revolving loan borrowings
under the U.S. senior secured credit facility will be due and payable on
December 31, 2003. As of December 31, 1998, there were $135.9 million of
outstanding revolving loans under the U.S. senior secured credit facility, and,
after taking into account outstanding letters of credit, the unused portion of
the revolving loan facility under the U.S. senior secured credit facility at
such date was $399.2 million.

The Company also financed repurchases of its Common Stock in 1998 with
revolving loans from its U.S. senior secured credit facility. During 1998, the
Company's Board of Directors authorized the repurchase by the Company of up to

30

$60 million of its Common Stock. Since July 1998, the Company has repurchased
2,277,003 shares of its Common Stock (including 570,000 shares repurchased in
late March 1999)for an aggregate cost of approximately $54.1 million. The
Company intends to finance any future repurchases with revolving loans from its
U.S. senior secured credit facility.

In addition to its operating cash needs, the Company believes its cash
requirements over the next several years (without taking into account the effect
of future acquisitions) will consist primarily of (i) annual capital
expenditures of $80 to $85 million, (ii) annual principal amortization payments
of bank term loans under its senior secured credit facilities beginning in 1999
of approximately $36.1 million, $39.2 million, $44.5 million, $60.5 million and
$207.0 million, (iii) expected total expenditures of approximately $24.7 million
over the next few years associated with plant rationalizations, employee
severance and workforce reductions and other plant exit costs, (iv) the
Company's interest requirements, including interest on revolving loans (the
principal amount of which will vary depending upon seasonal requirements and
acquisitions) and bank term loans under its senior secured credit facilities,
most of which bear fluctuating rates of interest, the 9% Debentures and the
Exchange Debentures (for which the Company intends to make future interest
payments in cash), and (v) payments of approximately $18.0 million for federal
and state tax liabilities in 1999, which will increase annually thereafter.

As part of its plan to integrate and rationalize the acquired
operations of AN Can, the Company established a liability of $49.5 million. The
Company's plan consists primarily of closing or downsizing certain manufacturing
plants and integrating the selling, general and administrative functions of the
former AN Can operations with those of the Company. The Company established
reserves for planned costs, which included approximately $22.6 million related
to employee severance and relocation costs, $3.5 million related to
administrative workforce reductions and $23.4 million related to plant exit
costs and other acquisition liabilities. Since its acquisition of AN Can in
August 1995, the Company incurred expenditures of $0.9 million in 1995, $6.5
million in 1996, $5.8 million in 1997 and $18.2 million in 1998, of which an
aggregate of $12.4 million related to administrative workforce reductions and
employee severance and relocation costs and $19.0 million related to plant exit
costs and other acquisition liabilities. The timing of these plant
rationalizations and other restructuring items has been dependent upon, among
other things, the expiration of binding labor obligations assumed by the Company
in its acquisition of AN Can and complexities associated with moving production
to other facilities and qualifying such facilities with customers to meet FDA
and such customers' requirements. Accordingly, these costs will principally be
incurred through 2000.

In connection with its 1998 acquisitions of CS Can, Clearplass and
Winn, the Company has developed plans to integrate these businesses into its
operations by rationalizing certain of the acquired plant operations. Pursuant
to these plans, the Company has accrued liabilities of $6.5 million, of which
$5.7 million relates to plant exit costs and other acquisition liabilities and
$0.8 million relates to employee severance and relocation costs. During 1998, in
connection with these plans the Company incurred $0.6 million for plant exit
costs and other acquisition costs and $0.3 million for employee severance costs.
The timing of these rationalization activities is dependent upon, among other
things, the time required to obtain necessary environmental permits and
approvals in connection with a consent order with the U.S. Environmental
Protection Agency to which the Company is subject as a result of its acquisition
of CS Can and complexities associated with the transfer of the labor force of
Campbell for CS Can to the Company. The Company expects that principally all
actions under these plans will be completed by the end of 2000.

Management believes that cash generated by operations and funds from
the revolving loans available under the Company's secured credit facilities will
be sufficient to meet the Company's expected operating needs, planned capital
expenditures, debt service and tax obligations for the foreseeable future. The
Company is also continually evaluating and pursuing acquisition opportunities in
the consumer goods packaging market, and will likely incur additional
indebtedness, including indebtedness under its U.S. revolving loan facility, to
finance any such acquisition.

31

The Company's secured credit facilities and the indentures with respect
to the 9% Debentures and the Exchange Debentures contain restrictive covenants
that, among other things, limit the Company's ability to incur debt, sell assets
and engage in certain transactions. Management does not expect these limitations
to have a material effect on the Company's business or results of operations.
The Company is in compliance with all financial and operating covenants
contained in such financing agreements and believes that it will continue to be
in compliance during 1999 with all such covenants.

Effect of Inflation and Interest Rate Fluctuations

Historically, inflation has not had a material effect on the Company,
other than to increase its cost of borrowing. In general, the Company has been
able to increase the sales prices of its products to reflect any increases in
the prices of raw materials. See "Business--Raw Materials" and "--Sales and
Marketing."

Because the Company has indebtedness which bears interest at floating
rates, the Company's financial results will be sensitive to changes in
prevailing market rates of interest. As of December 31, 1998, the Company had
$927.0 million of indebtedness outstanding, of which $367.8 million bore
interest at floating rates, taking into account interest rate swap agreements
entered into by the Company to mitigate the effect of interest rate
fluctuations. Under these agreements, floating rate interest was exchanged for
fixed rates of interest based on the three month LIBOR rate, which rate ranges
from 5.6% to 6.2%. The notional principal amounts of these agreements totaled
$200.0 million, of which $100.0 million matures in the first quarter of 1999 and
the remainder matures in the last quarter of 1999. Depending upon market
conditions, the Company may enter into additional interest rate swap or hedge
agreements (with counterparties that, in the Company's judgment, have sufficient
creditworthiness) to hedge its exposure against interest rate volatility. See
"Quantitative and Qualitative Disclosure About Market Risk--Interest Rate Risk."

New Accounting Pronouncements

In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income," SFAS No. 131, "Disclosure About Segments of an Enterprise and Related
Information," and SFAS No. 132, "Employers' Disclosure about Pensions and Other
Postretirement Benefits." SFAS No. 130 establishes standards for reporting and
the display of comprehensive income and its components. The adoption of this
pronouncement had no impact on the Company's results of operations or
stockholders' equity. SFAS No. 131 establishes standards for the reporting of
information relating to operating segments. In accordance with SFAS No. 131, the
Company has revised its reporting to separate its specialty packaging business
from its metal food container business. SFAS No. 132 revises financial statement
disclosures regarding pension and postretirement benefit plans, but does not
change the measurement or recognition of those plans. The Company has restated
and reclassified prior years' financial statements and disclosures to conform
with these pronouncements.

In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 is effective for all fiscal quarters of fiscal years beginning after June
15, 1999, and establishes accounting and reporting standards for derivative
instruments, requiring recognition of all derivatives as either assets or
liabilities in the statement of financial position and measurement of those
instruments at fair value. As required, the Company will adopt SFAS No. 133 in
2000. The Company does not anticipate that the adoption of SFAS No. 133 will
have a material impact on its consolidated financial statements.

32

Year 2000 Issues

Since 1997, the Company has been in the process of reviewing its
computer and operational systems to identify and determine the extent to which
its systems will be vulnerable to potential errors and failures as a result of
the "Year 2000" issue. The Year 2000 issue arises because many computer systems
and other equipment with embedded chips or processors use only two digits to
represent the year and, as a result, may be unable to process accurately certain
data before, during or after the year 2000. The Year 2000 issue presents several
risks to the Company, such as (i) the Company's internal systems may not
function properly, (ii) suppliers' computer and operational systems may not
function properly and, consequently, deliveries of materials and supplies may be
delayed, (iii) customers' computer and operational systems may not function
properly and, consequently, orders or payments for the Company's products may be
delayed, and (iv) the Company's banks' computer systems could malfunction,
disrupting the Company's orderly posting of deposits, funds, transfers and
payments. Such a disruption at any point in the Company's supply, manufacturing,
processing, distribution or financial chains could have a material adverse
effect on the Company's financial condition and results of operations.

As a manufacturer of consumer goods packaging products, the products
manufactured and sold by the Company are unaffected by Year 2000 issues since
they contain no microprocessors or similar electronic components.

The Company has undertaken various initiatives intended to ensure that
its internal computing infrastructure, business applications and shop-floor
systems are Year 2000 compliant. These systems assist in the control of the
Company's operations by performing such functions as processing financial data,
maintaining manufacturing processes and assisting with facilities management and
security. Many of these systems contain one or more microprocessors or other
embedded electronic components that could be affected by Year 2000 issues.
Failure of some of these systems could result in significant business
disruptions for the Company.

Based upon its identification and assessment efforts to date, the
Company has initiated modifications to its internal computing infrastructure,
business applications and shop-floor systems. These systems are being renovated
or replaced as necessary to assure Year 2000 compliance. Utilizing both internal
and external resources to identify and assess needed Year 2000 remediation, the
Company currently anticipates that its Year 2000 identification, assessment,
remediation and testing efforts will be completed by June 30, 1999, prior to any
currently anticipated impact on its computer equipment and software and
shop-floor systems. The Company estimates that as of December 31, 1998 it has
completed approximately 75-80% of the initiatives that it believes will be
necessary to fully address potential Year 2000 issues relating to its computer
equipment and software and shop-floor systems. The remaining initiatives are in
process and expected to be completed before or about June 30, 1999.

The Company believes that the cost of its Year 2000 identification,
assessment, remediation and testing efforts will approximate $2.0 to $3.0
million, which expenditures will be funded from operating cash flows. As of
December 31, 1998, the Company had incurred costs of approximately $1.6 million
related to the Year 2000 issue. Principally all of these costs relate to
analysis, repair, upgrade or replacement of existing software.

The Company relies on numerous third-party vendors and suppliers for a
wide variety of goods and services, including raw materials, telecommunications
and utilities such as water and electricity. Many of the Company's operating
locations would be adversely affected if these supplies and services were
curtailed as a result of a supplier's Year 2000 noncompliance. The Company's
vendor and supplier base is currently being surveyed through questionnaires.
Widespread disruption of certain utilities such as electricity would result in a
temporary closure of affected facilities and potential damage to production
equipment.

33

The Company is engaging in a Year 2000 business contingency planning
process that will identify and evaluate potential worst case business disruption
scenarios. Such plans may include securing alternate sources of supply,
stockpiling raw materials, increasing inventory levels, adjusting facility
shut-down and start-up schedules and other appropriate measures. The contingency
plans and related cost estimates will be refined as additional information
becomes available.

The Company presently believes that the Year 2000 issue will not pose
significant operational problems for the Company. However, if all Year 2000
issues are not identified, or assessment, remediation and testing are not
effected timely, there can be no assurance that the Year 2000 issue will not
materially and adversely impact the Company's results of operations or adversely
affect the Company's relationships with customers, vendors, or others.
Additionally, there can be no assurance that the Year 2000 issues of third
parties (including suppliers, customers, banks and governmental entities) will
not have a material adverse impact on the Company's systems or results of
operations.

The costs of the Company's Year 2000 identification, assessment,
remediation and testing efforts and the dates on which the Company believes it
will complete such efforts are based upon management's best estimates, which
were derived using numerous assumptions regarding future events, including the
continued availability of certain resources, third-party remediation plans, and
other factors. There can be no assurance that these estimates will prove to be
accurate, and actual results could differ materially from those currently
anticipated. Specific factors that could cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in Year 2000 issues, the ability to identify, assess, remediate and test all
relevant computer codes and embedded technology, unanticipated Year 2000
noncompliance by suppliers and/or customers, and similar uncertainties.

Forward Looking Statements

Statements included in "Management's Discussion and Analysis of Results
of Operations and Financial Condition" and elsewhere in this Annual Report on
Form 10-K 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. These
forward-looking statements are made based upon management's expectations and
beliefs concerning future events impacting the Company and therefore involve a
number of uncertainties and risks. As a result, the actual results of operations
or financial condition of the Company could differ materially from those
expressed or implied in these forward-looking statements. Important factors that
could cause the actual results of operations or financial condition of the
Company to differ from those expressed or implied in these forward-looking
statements include, but are not necessarily limited to, the ability of the
Company to effect cost reduction initiatives and realize benefits from capital
investments; the ability of the Company to locate or acquire suitable
acquisition candidates on acceptable terms; the Company's ability to assimilate
the operations of its acquired businesses into its existing operations; the
Company's ability to generate free cash flow to invest in its business and
service its indebtedness; limitations and restrictions contained in the
Company's instruments and agreements governing its indebtedness; the ability of
the Company to retain sales with its major customers; the size and quality of
the vegetable, tomato and fruit harvests in the midwest and west regions of the
United States; changes in the pricing and availability to the Company of raw
materials or the Company's ability generally to pass raw material price
increases through to its customers; changes in consumer preferences for
different packaging products; competitive pressures, including new product
developments or changes in competitors' pricing for products; changes in
governmental regulations or enforcement practices; changes in general economic
conditions, such as fluctuations in interest rates; changes in labor relations
and costs; and other factors described elsewhere in this Annual Report on Form
10-K or in the Company's other filings with the Securities and Exchange
Commission.

34

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

Market risks relating to the Company's operations result primarily from
changes in interest rates. The Company also has limited foreign currency risk
associated with its Canadian operations. The Company employs established
policies and procedures to manage its exposure to fluctuations in interest rates
and the value of foreign currencies. Interest rate and foreign currency
transactions are used only to the extent considered necessary to meet the
Company's objectives. The Company does not utilize derivative financial
instruments for trading or other speculative purposes.

Interest Rate Risk

The Company's interest rate risk management objective is to limit the
impact of interest rate changes on its earnings and cash flow and to lower its
overall borrowing cost. To achieve its objectives, the Company regularly
evaluates the amount of its variable rate debt as a percentage of its aggregate
debt. The Company manages its exposure to interest rate fluctuations in its
variable rate debt through interest rate swap agreements. These agreements
effectively convert interest rate exposure from variable rates to fixed rates of
interest without the exchange of the underlying principal amounts. Notes 6 and 7
to the Company's Consolidated Financial Statements included elsewhere in this
Annual Report on Form 10-K outline the principal amounts, interest rates, fair
values and other terms required to evaluate the expected cash flows from these
agreements. See also "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Effect of Inflation and Interest Rate
Fluctuations."

Based on the average outstanding amount of variable rate indebtedness
of the Company in 1998, a one percentage point change in the interest rates for
the Company's variable rate debt would have impacted the Company's 1998 interest
expense by an aggregate of approximately $4.4 million, after giving effect to
the Company's interest rate swap agreements.

Foreign Currency Exchange Rate Risk

The Company does not conduct a significant portion of its manufacturing
or sales activity in foreign markets. Presently, the Company's only foreign
activities are conducted in Canada. The Company's reported financial results
could be affected, however, by factors such as changes in foreign currency
exchange rates in the markets where it operates. When the U.S. dollar
strengthens against such foreign currencies, the reported U.S. dollar value of
local currency operating profits generally decreases; when the U.S. dollar
weakens against such foreign currencies, the reported U.S. dollar value of local
currency operating profits generally increases. Since the Company does not have
significant foreign operations, the Company does not believe it is necessary to
enter into any derivative financial instruments to reduce its exposure to
foreign currency exchange rate risk.

Because the Company's Canadian subsidiary operates within its local
economic environment, the Company believes it is appropriate to finance such
operation with local currency borrowings. In determining the amount of such
borrowings, the Company evaluates the operation's short and long-term business
plans, tax implications, and the availability of borrowings with acceptable
interest rates and terms. This strategy mitigates the risk of reported losses or
gains in the event that the Canadian currency strengthens or weakens against the
U.S. dollar. Furthermore, the Company's Canadian operating profit is used to
repay its local borrowings or is reinvested in Canada, and is not expected to be
remitted to the Company or invested elsewhere. As a result, it is not necessary
for the Company to mitigate the economic effects of currency rate fluctuations
on its Canadian earnings.

Item 8. Financial Statements and Supplementary Data.

See Item 14 below for a listing of financial statements and schedules
included therein.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

Not applicable.

35

PART III

Item 10. Directors and Executive Officers of the Registrant.

The information required by this Item is set forth in the Company's
Proxy Statement for its Annual Meeting of Stockholders to be held on May 18,
1999 in the sections entitled "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance", and is incorporated herein by
reference.

Executive Officers of Holdings

The following table sets forth certain information (ages as of December
31, 1998) concerning the executive officers of Holdings.

Name Age Position
- ---- --- --------
R. Philip Silver ............... 56 Chairman of the Board and Co-Chief
Executive Officer
D. Greg Horrigan ............... 55 President and Co-Chief Executive Officer
Harley Rankin, Jr .............. 59 Executive Vice President, Chief Financial
Officer and Treasurer
Frank W. Hogan, III ............ 38 Vice President, General Counsel and
Secretary
Glenn A. Paulson ............... 55 Vice President--Corporate Development
Harold J. Rodriguez, Jr ........ 43 Vice President, Controller and Assistant
Treasurer

Executive Officers of Containers

The following table sets forth certain information (ages as of December 31,
1998) concerning the executive officers of Containers.

Name Age Position
- ---- --- --------
James D. Beam .................. 55 President
Gary M. Hughes ................. 56 Executive Vice President
Gerald T. Wojdon ............... 62 Executive Vice President
Joseph A. Heaney ............... 45 Vice President--Finance
Ward B. Thompson ............... 50 Vice President--Sales and Marketing
John Wilbert ................... 40 Vice President--Operations

Executive Officers of Plastics

The following table sets forth certain information (ages as of December 31,
1998) concerning the executive officers of Plastics.

Name Age Position
- ---- --- --------
Russell F. Gervais ............. 55 President
Howard H. Cole ................. 53 Vice President
Colleen J. Jones ............... 38 Vice President--Finance
Alan H. Koblin ................. 46 Vice President--Sales & Marketing
Charles Minarik ................ 61 Vice President--Operations and Commercial
Development

36

Mr. Silver has been Chairman of the Board and Co-Chief Executive Officer of
Holdings since March 1994. Mr. Silver is one of the founders of the Company and
was formerly President of Holdings. Mr. Silver has been a Director of Holdings
since its inception. Mr. Silver has been a Director of Containers since its
inception in August 1987 and Vice President of Containers since May 1995. Mr.
Silver has been a Director of Plastics since its inception in August 1987 and
Chairman of the Board of Plastics since March 1994. Prior to founding the
Company in 1987, Mr. Silver was a consultant to the packaging industry. Mr.
Silver was President of Continental Can Company from June 1983 to August 1986.
Mr. Silver is a Director of Johnstown America Industries, Inc.

Mr. Horrigan has been President and Co-Chief Executive Officer of Holdings
since March 1994. Mr. Horrigan is one of the founders of the Company and was
formerly Chairman of the Board of Holdings. Mr. Horrigan has been a Director of
Holdings since its inception. Mr. Horrigan has been Chairman of the Board of
Containers and a Director of Plastics since their inception in August 1987. Mr.
Horrigan was Executive Vice President and Operating Officer of Continental Can
Company from 1984 to 1987.

Mr. Rankin has been Executive Vice President and Chief ffFinancial Officer
of Holdings since its inception and Treasurer of Holdings since January 1992.
Mr. Rankin has been Vice President of Containers and Plastics since January 1991
and May 1991, respectively, and was Treasurer of Plastics from January 1994 to
December 1994. Prior to joining the Company, Mr. Rankin was Senior Vice
President and Chief Financial Officer of Armtek Corporation. Mr. Rankin was Vice
President and Chief Financial Officer of Continental Can Company from November
1984 to August 1986.

Mr. Hogan has been Vice President, General Counsel and Secretary of
Holdings since June 1997. Mr. Hogan has also been Vice President, General
Counsel and Secretary of Containers and Plastics since June 1997. From September
1995 until June 1997, Mr. Hogan was a partner at the law firm of Winthrop,
Stimson, Putnam & Roberts. From April 1988 to September 1995, Mr. Hogan was an
associate at such firm.

Mr. Paulson has been Vice President--Corporate Development of Holdings
since January 1996. Mr. Paulson has also been Vice President of Containers since
January 1999. Mr. Paulson was employed by Containers to manage the transition of
AN Can from August 1995 to December 1995. From January 1989 to July 1995, Mr.
Paulson was employed by ANC, last serving as Senior Vice President and General
Manager, Food Metal and Specialty, North America. Prior to his employment with
ANC, Mr. Paulson was President of the beverage packaging operations of
Continental Can Company.

Mr. Rodriguez has been Vice President of Holdings since March 1994 and
Controller and Assistant Treasurer of Holdings since March 1990. Prior to March
1990, Mr. Rodriguez was Assistant Controller and Assistant Treasurer of Holdings
since its inception. Mr. Rodriguez has been Vice President of Containers and
Plastics since March 1994. From 1978 to 1987, Mr. Rodriguez was employed by
Ernst & Young LLP, last serving as Senior Manager specializing in taxation.

Mr. Beam has been President of Containers since July 1990. From September
1987 to July 1990, Mr. Beam was Vice President--Marketing & Sales of Containers.
Mr. Beam was Vice President and General Manager of Continental Can Company,
Western Food Can Division, from March 1986 to September 1987.

37

Mr. Hughes has been Executive Vice President of Containers since January
1998. Previously, Mr. Hughes was Vice President--Sales & Marketing of Containers
since July 1990. From February 1988 to July 1990, Mr. Hughes was Vice President,
Sales and Marketing of the Beverage Division of Continental Can Company. Prior
to February 1988, Mr. Hughes was employed by Continental Can Company in various
sales positions.

Mr. Wojdon has been Executive Vice President of Containers since January
1998. Previously, Mr. Wojdon was Vice President--Operations of Containers since
September 1987. From August 1982 to August 1987, Mr. Wojdon was General Manager
of Manufacturing of the Can Division of the Carnation Company.

Mr. Heaney has been Vice President--Finance of Containers since October
1995. From September 1990 to October 1995, Mr. Heaney was Controller, Food Metal
and Specialty Division of ANC. From August 1977 to August 1990, Mr. Heaney was
employed by ANC and American Can Company in various divisional, regional and
plant finance/accounting positions.

Mr. Thompson has been Vice President--Sales & Marketing of Containers since
March 1998. Previously, Mr. Thompson was employed by Rexam plc in various
officer positions, including most recently as Vice President, Business
Development (coated films and paper sector); President (Metallising); and Vice
President, General Manager (Metal Americas).

Mr. Wilbert has been Vice President--Operations of Containers since January
1998. From October 1992 to January 1998, Mr. Wilbert was Area Manager of
Operations of Containers. Prior to 1992, Mr. Wilbert was employed by Containers
in various positions.

Mr. Gervais has been President of Plastics since December 1992. From
September 1989 to December 1992, Mr. Gervais was Vice President--Sales &
Marketing of Plastics. From March 1984 to September 1989, Mr. Gervais was
President and Chief Executive Officer of Aim Packaging, Inc.

Mr. Cole has been Vice President and Assistant Secretary of Plastics since
September 1987. From April 1986 to September 1987, Mr. Cole was Manager of
Personnel of the Monsanto Engineered Products Division of Monsanto Company.

Ms. Jones has been Vice President--Finance of Plastics since December 1994
and Assistant Secretary of Plastics since November 1993. From November 1993 to
December 1994, Ms. Jones was Corporate Controller of Plastics and from July 1989
to November 1993, she was Manager--Finance of Plastics. From July 1982 to July
1989, Ms. Jones was an Audit Manager for Ernst & Young LLP.

Mr. Koblin has been Vice President--Sales & Marketing of Plastics since
December 1994. From 1992 to 1994, Mr. Koblin was Director of Sales & Marketing
of Plastics. From 1990 to 1992, Mr. Koblin was Vice President of Churchill
Industries.

Mr. Minarik has been Vice President--Operations and Commercial Development
of Plastics since May 1993. From February 1991 to August 1992, Mr. Minarik was
President of Wheaton Industries Plastics Group. Mr. Minarik was Vice
President--Marketing of Constar International, Inc. from March 1983 to February
1991.

38

Item 11. Executive Compensation.

The information required by this Item is set forth in the Company's Proxy
Statement for its Annual Meeting of Stockholders to be held on May 18, 1999 in
the sections entitled "Election of Directors--Compensation of Directors",
"Executive Compensation" and "Compensation Committee Interlocks and Insider
Participation", and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The information required by this Item is set forth in the Company's Proxy
Statement for its Annual Meeting of Stockholders to be held on May 18, 1999 in
the section entitled "Security Ownership of Certain Beneficial Owners and
Management", and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions.

The information required by this Item is set forth in the Company's Proxy
Statement for its Annual Meeting of Stockholders to be held on May 18, 1999 in
the section entitled "Certain Relationships and Related Transactions", and is
incorporated herein by reference.

39

PART IV

Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K.

(a)

Financial Statements:

Report of Independent Auditors.............................................................. F-1

Consolidated Balance Sheets at December 31, 1998 and 1997................................... F-2

Consolidated Statements of Operations for the years ended December 31, 1998, 1997
and 1996............................................................................... F-3

Consolidated Statements of Deficiency in Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996....................................................... F-4

Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997
and 1996............................................................................... F-5

Notes to Consolidated Financial Statements.................................................. F-7

Schedules:

I. Condensed Financial Information of Silgan Holdings Inc.:
Condensed Balance Sheets at December 31, 1998 and 1997............................. F-43

Condensed Statements of Operations for the years ended December 31, 1998,
1997 and 1996............................................................. F-44

Condensed Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996............................................................. F-45

Notes to Condensed Financial Statements............................................ F-46

II. Schedules of Valuation and Qualifying Accounts for the years ended
December 31, 1998, 1997 and 1996............................................ F-48

All other financial statements and 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.

40

Exhibits:

Exhibit
Number Description
- ------ -----------

3.1 Restated Certificate of Incorporation of Holdings(incorporated
by reference to Exhibit 3.1 filed with Holdings' Annual
Report on Form 10-K for the year ended December 31, 1996,
Commission File No. 000-22117).

3.2 Amended and Restated By-laws of Holdings (incorporated by
reference to Exhibit 3.2 filed with Holdings' Annual Report on
Form 10-K for the year ended December 31, 1996, Commission
File No.
000-22117).

4.1 Indenture, dated as of July 22, 1996, between Holdings and
State Street Bank & Trust Company (as successor to Fleet
National Bank) as Trustee, with respect to the Exchange
Debentures (incorporated by reference to Exhibit 4.10 filed
with Holdings' Amendment No. 2 to Registration Statement on
Form S-4, dated October 31, 1996, Registration Statement No.
33-9979).

4.2 Form of Holdings' Subordinated Debentures due 2006
(incorporated by reference to Exhibit 4.11 filed with
Holdings' Amendment No. 2 to Registration Statement on Form
S-4, dated October 31, 1996, Registration Statement No.
33-9979).

4.3 Indenture, dated as of June 9, 1997, between Holdings (as
successor to Silgan Corporation) and The First National Bank
of Chicago, as trustee, with respect to the 9% Debentures
(incorporated by reference to Exhibit 4.1 filed with Holdings'
Current Report on Form 8-K, dated June 9, 1997, Commission
File No. 000-22117).

4.4 First Supplemental Indenture, dated as of June 24, 1997 among
Holdings, Silgan Corporation and The First National Bank of
Chicago, as trustee, to the Indenture, dated as of June 9,
1997, between Holdings (as successor to Silgan Corporation)
and The First National Bank of Chicago, as trustee, with
respect to the 9% Debentures (incorporated by reference to
Exhibit 4.2 filed with Holdings' Registration Statement on
Form S-4, dated July 8, 1997, Registration Statement No.
333-30881).

4.5 Form of Holdings' 9% Senior Subordinated Debentures due 2009
(incorporated by reference to Exhibit 4.10 filed with
Holdings' Registration Statement on Form S-4, dated July 8,
1997, RegistrationStatement No. 333-30881).

10.1 Stockholders Agreement, dated as of December 21, 1993, among
R. Philip Silver, D. Greg Horrigan, The Morgan Stanley
Leveraged Equity Fund II, L.P., Bankers Trust New York
Corporation, First Plaza Group Trust and Holdings
(incorporated by reference to Exhibit 3 filed with Holdings'
Current Report on Form 8-K, dated March 25, 1994, Commission
File No. 33-28409).

10.2 Amendment to Stockholders Agreement, dated as of February 14,
1997, among R. Philip Silver, D. Greg Horrigan, The Morgan
Stanley Leveraged Equity Fund II, L.P., Bankers Trust New York
Corporation, and Holdings (incorporated by reference to
Exhibit 10.42 filed with Holdings' Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, Commission File
No. 000-22117).

41

Exhibit
Number Description
- ------ -----------

+10.3 Amended and Restated Management Services Agreement, dated as
of February 14, 1997, between S&H Inc. and Holdings
(incorporated by reference to Exhibit 10.25 filed with
Holdings' Annual Report on Form 10-K for the year ended
December 31, 1996, Commission File No. 000-22117).

+10.4 Amended and Restated Management Services Agreement, dated as
of February 14, 1997, between S&H Inc. and Containers
(incorporated by reference to Exhibit 10.26 filed with
Holdings' Annual Report on Form 10-K for the year ended
December 31, 1996, Commission File No. 000-22117).

+10.5 Amended and Restated Management Services Agreement, dated as
of February 14, 1997, between S&H Inc. and Plastics
(incorporated by reference to Exhibit 10.27 filed with
Holdings' Annual Report on Form 10-K for the year ended
December 31, 1996, Commission File No. 000-22117).

10.6 Credit Agreement, dated as of July 29, 1997, among Holdings,
Containers, Plastics, certain other subsidiaries, various
banks, Bankers Trust Company, as Administrative Agent and as a
Co-Arranger, Bank of America National Trust & Savings
Association, as Syndication Agent and as a Co-Arranger,
Goldman Sachs Credit Partners L.P., as Co-Documentation Agent
and as a Co-Arranger, and Morgan Stanley Senior Funding, Inc.,
as Co-Documentation Agent and as a Co-Arranger (incorporated
by reference to Exhibit 99.1 filed with Holdings' Current
Report on Form 8-K, dated August 8, 1997, Commission File No.
000-22117).

10.7 Security Agreement, dated as of July 29, 1997, among Holdings,
Containers, Plastics, certain other subsidiaries of any of
them and Bankers Trust Company, as Collateral Agent
(incorporated by reference to Exhibit 99.2 filed with
Holdings' Current Report on Form 8-K, dated August 8, 1997,
Commission File No. 000-22117).

10.8 Pledge Agreement dated as of July 29, 1997, made by Holdings,
Containers, Plastics and Silgan Containers Manufacturing
Corporation (as successor to California-Washington Can
Corporation and SCCW Can Corporation), as Pledgors, in favor
of Bankers Trust Company, as Collateral Agent and as Pledgee
(incorporated by reference to Exhibit 99.3 filed with
Holdings' Current Report on Form 8-K, dated August 8, 1997,
Commission File No. 000-22117).

10.9 Borrowers/Subsidiaries Guaranty, dated as of July 29, 1997,
made by Holdings, Containers, Plastics and Silgan Containers
Manufacturing Corporation (as successor to
California-Washington Can Corporation and SCCW Can
Corporation) (incorporated by reference to Exhibit 99.4 filed
with Holdings' Current Report on Form 8-K, dated August 8,
1997, Commission File No. 000-22117).

42

Exhibit
Number Description
- ------ -----------

10.10 Purchase Agreement, dated as of September 3, 1993, between
Containers and Del Monte (incorporated by reference to Exhibit
1 filed with Holdings' Current Report on Form 8-K, dated
January 5, 1994, Commission File No. 33-28409).

10.11 Amendment to Purchase Agreement, dated as of December 10,
1993, between Containers and Del Monte (incorporated by
reference to Exhibit 2 filed with Holdings' Current Report on
Form 8-K, dated January 5, 1994, Commission File No.
33-28409).

10.12 Asset Purchase Agreement, dated as of June 2, 1995, between
ANC and Containers (incorporated by reference to Exhibit 1
filed with Holdings' Current Report on Form 8-K dated August
14, 1995, Commission File No. 33-28409).

10.13 Purchase Agreement, dated as of June 1, 1998, by and among
Campbell, Silgan Can Company and Containers (incorporated by
reference to Exhibit 2 filed with Holdings' Current Report on
Form 8-K dated June 15, 1998, Commission File No. 000-22117.)

10.14 Underwriting Agreement, dated as of February 13, 1997, among
Holdings, Silgan Corporation, Containers, Plastics, The Morgan
Stanley Leveraged Equity Fund II, L.P., Bankers Trust New York
Corporation and the underwriters listed on Schedule I thereto
(incorporated by reference to Exhibit 10.40 filed with
Holdings' Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, Commission File No. 000-22117).

10.15 Placement Agreement between Silgan Corporation and Morgan
Stanley & Co. Incorporated, dated June 3, 1997 (incorporated
by reference to Exhibit 99.1 filed with Holdings' Current
Report on Form 8-K dated June 9, 1997, Commission File No.
000-22117).

+10.16 Employment Agreement, dated as of September 14, 1987, between
James Beam and Canaco Corporation (Containers) (incorporated
by reference to Exhibit 10(vi) filed with Silgan Corporation's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719).

+10.17 Amended and Restated Employment Agreement, dated as of June
18, 1987, between Gerald Wojdon and Canaco Corporation
(Containers) (incorporated by reference to Exhibit 10(vii)
filed with Silgan Corporation's Registration Statement on Form
S-1, dated January 11, 1998, Registration Statement No.
33-18719)

+10.18 Employment Agreement, dated as of September 1, 1989, between
Silgan Corporation, InnoPak Plastics Corporation (Plastics),
Russell F. Gervais and Aim Packaging, Inc. (incorporated by
reference to Exhibit 5 filed with Silgan Corporation's Report
on Form 8-K, dated March 15, 1989, Commission File No.
33-18719).

43

Exhibit
Number Description
- ------- -----------

+10.19 InnoPak Plastics Corporation (Plastics) Pension Plan for
Salaried Employees (incorporated by reference to Exhibit 10.32
filed with Silgan Corporation's Annual Report on Form 10-K for
the year ended December 31, 1988, Commission File No.
33-18719).

+10.20 Containers Pension Plan for Salaried Employees (incorporated
by reference to Exhibit 10.34 filed with Silgan Corporation's
Annual Report on Form 10-K for the year ended December 31,
1988, Commission File No. 33-18719).

+10.21 Silgan Holdings Inc. Fourth Amended and Restated 1989 Stock
Option Plan (incorporated by reference to Exhibit 10.21 filed
with Holdings' Annual Report on Form 10-K for the year ended
December 31,1996, Commission File No. 000-22117).

+10.22 Form of Holdings Nonstatutory Stock Option Agreement
(incorporated by reference to Exhibit 10.22 filed with
Holdings' Annual Report on Form 10-K for the year ended
December 31, 1996, Commission File No. 000-22117).

*12 Computations of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends for the years ended December 31,
1998, 1997 and 1996.

*21 Subsidiaries of the Registrant.

*23 Consent of Ernst & Young LLP.

*27 Financial Data Schedule for the fiscal year ended December 31,
1998.

(b) Reports on Form 8-K:

No reports on Form 8-K were filed during the fourth quarter of 1998.

- -----------------
*Filed herewith.
+Management contract or compensatory plan or arrangement.

44

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: March 24, 1999 By /s/ R. Philip Silver
--------------------
R. Philip Silver
Chairman of the Board and
Co-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
- --------- ----- ----

Chairman of the Board and
Co-Chief Executive Officer
/s/ R. Philip Silver (Principal Executive Officer) March 24, 1999
- --------------------
(R. Philip Silver)

President, Co-Chief Executive
/s/ D. Greg Horrigan Officer and Director March 24, 1999
- --------------------
(D. Greg Horrigan)

/s/ Leigh J. Abramson Director March 24, 1999
- --------------------
(Leigh J. Abramson)

/s/ Thomas M. Begel Director March 24, 1999
- --------------------
(Thomas M. Begel)

/s/ Jeffrey C. Crowe Director March 24, 1999
- --------------------
(Jeffrey C. Crowe)

/s/ Michael M. Janson Director March 24, 1999
- ---------------------
(Michael M. Janson)

Executive Vice President, Chief
Financial Officer and Treasurer
/s/ Harley Rankin, Jr. (Principal Financial Officer) March 24, 1999
- ---------------------
(Harley Rankin, Jr.)

Vice President, Controller and
Assistant Treasurer
/s/ Harold J. Rodriguez, Jr. (Principal Accounting Officer) March 24, 1999
- -------------------------
(Harold J. Rodriguez, Jr.)

45

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Silgan Holdings Inc.

We have audited the accompanying consolidated financial statements and
schedules of Silgan Holdings Inc. as listed in the accompanying index to the
financial statements (Item 14(a)). These financial statements and schedules are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 listed in the accompanying
index to the financial statements (Item 14(a)) present fairly, in all material
respects, the consolidated financial position of Silgan Holdings Inc. at
December 31, 1998 and 1997, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

/s/ Ernst & Young LLP

Stamford, Connecticut
January 25, 1999

F-1

SILGAN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
(Dollars in thousands)

1998 1997
---- ----

Assets
Current assets:
Cash and cash equivalents ......................... $ 4,753 $ 53,718
Accounts receivable, less allowances for
doubtful accounts of $3,325 and $3,415,
respectively ..................................... 134,004 125,837
Inventories ....................................... 250,085 209,963
Prepaid expenses and other current assets ......... 9,880 9,997
---------- ----------
Total current assets ........................... 398,722 399,515

Property, plant and equipment, net .................. 671,466 531,765
Goodwill, net ....................................... 109,182 66,895
Deferred tax asset .................................. 15,902 32,024
Other non-current assets ............................ 28,773 20,368
---------- ----------
$1,224,045 $1,050,567
========== ==========
Liabilities and Deficiency in Stockholders' Equity
Current liabilities:
Trade accounts payable ............................ $ 184,543 $ 142,281
Accrued payroll and related costs ................. 45,566 40,621
Accrued interest payable .......................... 10,357 10,939
Accrued expenses and other current liabilities..... 23,220 20,871
Current portion of long-term debt ................. 36,065 20,218
---------- ----------
Total current liabilities ...................... 299,751 234,930

Long-term debt ...................................... 890,976 785,036
Other long-term liabilities ......................... 90,626 97,849

Deficiency in stockholders' equity:
Common stock ($0.01 par value per share;
100,000,000 shares authorized, 19,939,914
and 18,862,834 shares issued and 18,256,411
and 18,862,834 shares outstanding, respectively).. 199 189
Additional paid-in capital ........................ 117,911 110,935
Accumulated deficit ............................... (131,940) (177,864)
Accumulated other comprehensive loss .............. (723) (508)
Treasury stock at cost, 1,683,503 shares
in 1998 .......................................... (42,755) --
---------- ----------
Total deficiency in stockholders' equity ....... (57,308) (67,248)
---------- ----------
$1,224,045 $1,050,567
========== ==========

See accompanying notes.

F-2

SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1998, 1997 and 1996
(Dollars in thousands, except per share data)

1998 1997 1996
---- ---- ----

Net sales .............................. $1,738,715 $1,511,370 $1,405,742

Cost of goods sold ..................... 1,516,292 1,303,463 1,221,941
---------- ---------- ----------
Gross profit ......................... 222,423 207,907 183,801

Selling, general and administrative
expenses ............................ 68,159 60,826 60,511

Non-cash stock option charge ........... -- 22,522 --
---------- ---------- ----------
Income from operations ............... 154,264 124,559 123,290

Interest expense and other related
financing costs ..................... 81,456 80,693 89,353
---------- ---------- ----------
Income before income taxes ........... 72,808 43,866 33,937

Income tax provision (benefit) ......... 26,884 (6,700) 3,300
---------- ---------- ----------
Income before extraordinary charges .. 45,924 50,566 30,637

Extraordinary charges relating to early
extinguishment of debt, net of income
taxes ................................. -- 16,382 2,222
---------- ---------- ----------
Net income before preferred stock
dividend requirement ................ 45,924 34,184 28,415

Preferred stock dividend requirement ... -- 3,224 3,006
---------- ---------- ----------
Net income available to common
stockholders ........................ $ 45,924 $ 30,960 $ 25,409
========== ========== ==========
Basic earnings per common share:
Income before extraordinary charges... $2.41 $2.75 $1.75
Extraordinary charges ................ -- (0.89) (0.13)
Preferred stock dividend requirement.. -- (0.18) (0.17)
----- ----- -----
Net income per common share ............ $2.41 $1.68 $1.45
===== ===== =====
Diluted earnings per common share:
Income before extraordinary charges .. $2.30 $2.56 $1.65
Extraordinary charges ................ -- (0.83) (0.12)
Preferred stock dividend requirement.. -- (0.16) (0.16)
----- ----- -----
Net income per diluted common share .... $2.30 $1.57 $1.37
===== ===== =====

See accompanying notes.

F-3

SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS'EQUITY
For the years ended December 31, 1998, 1997 and 1996
(Dollars and shares in thousands)

Common Stock Accumulated Total
------------ Additional other deficiency in
Par paid-in Accumulated comprehensive Treasury stockholders'
Shares Value capital deficit income (loss) stock equity
------ ----- --------- ----------- ------------- -------- -------------

Balance at January 1, 1996 ....... 19,446 $195 $ 33,423 $(213,422) $(758) $ -- $(180,562)

Comprehensive income:

Net income ..................... -- -- -- 25,409 -- -- 25,409

Foreign currency translation ... -- -- -- -- (16) -- (16)
---------
Comprehensive income ........... 25,393

Purchase and retirement of
class B common stock ........... (4,283) (43) (14,957) (20,811) -- -- (35,811)
------- ---- -------- --------- ----- -------- ---------
Balance at December 31, 1996 ..... 15,163 152 18,466 (208,824) (774) -- (190,980)

Comprehensive income:

Net income ..................... -- -- -- 30,960 -- -- 30,960

Foreign currency translation ... -- -- -- -- 266 -- 266
---------
Comprehensive income ........... 31,226

Issuance of common stock ......... 3,700 37 67,183 -- -- -- 67,220

Conversion of subsidiary
stock options to options
of parent company .............. -- -- 25,286 -- -- -- 25,286
------- ---- -------- --------- ----- -------- ---------
Balance at December 31, 1997 ..... 18,863 189 110,935 (177,864) (508) -- (67,248)

Comprehensive income:

Net income ..................... -- -- -- 45,924 -- -- 45,924

Additional minimum pension
liability ..................... -- -- -- -- (20) -- (20)

Foreign currency translation ... -- -- -- -- (195) -- (195)
---------
Total adjustments ........... (215)
---------
Comprehensive income ........... 45,709

Proceeds from issuance of common
stock for employee stock option
exercises, including income tax
benefit of $5,268 .............. 1,077 10 7,504 -- -- -- 7,514

Purchase of treasury stock ....... (1,707) -- -- -- -- (43,378) (43,378)

Issuance of treasury stock
for stock option exercises ..... 23 -- (528) -- -- 623 95
------- ---- -------- --------- ----- -------- ---------
Balance at December 31, 1998 ..... 18,256 $199 $117,911 $(131,940) $(723) $(42,755) $ (57,308)
====== ==== ======== ========= ===== ======== =========

See accompanying notes.

F-4

SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)

1998 1997 1996
---- ---- ----

Cash flows from operating activities:
Net income before preferred stock
dividend requirement ........................ $ 45,924 $ 34,184 $ 28,415
Adjustments to reconcile net income
before preferred stock dividend requirement
to net cash provided by operating activities:
Depreciation .............................. 74,274 60,964 54,830
Amortization of goodwill .................. 3,226 2,478 2,672
Amortization of debt issuance costs ....... 1,606 3,044 4,484
Accretion of discount on discount
debentures .............................. -- -- 12,077
Non-cash stock option charge .............. -- 22,522 --
Deferred income tax expense (benefit) ..... 16,131 (8,100) --
Extraordinary charges relating to early
extinguishment of debt, net ............. -- 16,382 2,222
Changes in assets and liabilities, net
of effect of acquisitions:
(Increase) decrease in accounts
receivable ........................ (2,415) (19,034) 15,102
(Increase) decrease in inventories ... (24,322) (5,093) 20,348
Increase (decrease) in trade
accounts payable .................. 40,160 16,188 (17,145)
(Decrease) increase in other
long-term liabilities ............. (12,143) 13,698 (8,250)
Other, net increase (decrease) ....... 4,971 (19,373) 10,444
--------- --------- ---------
Total adjustments ................ 101,488 83,676 96,784
--------- --------- ---------
Net cash provided by operating
activities .............................. 147,412 117,860 125,199
--------- --------- ---------

Cash flows from investing activities:
Acquisition of businesses ..................... (194,034) (42,775) (43,043)
Capital expenditures .......................... (86,073) (62,233) (56,851)
Proceeds from asset sales ..................... 1,770 4,553 1,557
--------- --------- ---------
Net cash used in investing activities ..... (278,337) (100,455) (98,337)
--------- --------- ---------

Continued on following page.

F-5

SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)

1998 1997 1996
---- ---- ----

Cash flows from financing activities:
Borrowings under revolving loans .............. 1,039,677 1,118,950 952,050
Repayments under revolving loans .............. (903,777) (1,146,750) (931,350)
Net proceeds from issuance of common stock .... -- 67,220 --
Proceeds from stock option exercises .......... 2,341 -- --
Purchase of treasury stock .................... (43,378) -- --
Proceeds from issuance of long-term debt ...... 7,193 839,334 125,000
Repayments and redemptions of
long-term debt .............................. (20,096) (830,427) (183,880)
Proceeds from issuance of cumulative
exchangeable redeemable preferred stock ..... -- -- 50,000
Repurchase of common stock .................... -- -- (35,811)
Debt financing costs incurred ................. -- (13,031) (3,956)
----------- ----------- -----------
Net cash provided by (used in) financing
activities .............................. 81,960 35,296 (27,947)
----------- ----------- -----------

Net (decrease) increase in cash and
cash equivalents ................................. (48,965) 52,701 (1,085)

Cash and cash equivalents at
beginning of year ................................ 53,718 1,017 2,102
----------- ----------- -----------

Cash and cash equivalents at
end of year ...................................... $ 4,753 $ 53,718 $ 1,017
=========== =========== ===========

Supplementary data:
Interest paid ................................. $ 80,654 $ 76,385 $ 68,390
Income tax payments (refunds), net ............ 3,835 1,733 (4,836)
Preferred stock dividend in lieu of
cash dividend ............................... -- 3,208 2,998

See accompanying notes.

F-6

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

1. Summary of Significant Accounting Policies

Nature of Business. Silgan Holdings Inc. ("Holdings"; together with its wholly
owned subsidiaries, the "Company") is a company owned by Holdings' management,
The Morgan Stanley Leveraged Equity Fund II, L. P. ("MSLEF II"), an affiliate of
Morgan Stanley & Co. Incorporated ("MS & Co."), and public shareholders. The
Company and its wholly owned operating subsidiaries, Silgan Containers
Corporation ("Containers") and Silgan Plastics Corporation ("Plastics"), are
predominantly engaged in the manufacture and sale of steel and aluminum
containers for human and pet food products. The Company also manufactures custom
designed plastic containers used for health and personal care products, and
specialty packaging items including metal caps and closures, plastic bowls and
paperboard containers used by processors in the food industry. Principally all
of the Company's businesses are based in the United States.

Principles of Consolidation. The consolidated financial statements include the
accounts of Holdings and its subsidiaries, all of which are wholly owned. All
significant intercompany transactions have been eliminated.

Foreign Currency Translation. The functional currency for the Company's foreign
operations is the Canadian dollar. Balance sheet accounts of the Company's
foreign affiliates are translated at exchange rates in effect at the balance
sheet date, while revenue and expense accounts are translated at average rates
prevailing during the year. Translation adjustments are reported as a component
of stockholders' equity and other comprehensive income.

Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.

Cash and cash equivalents. Cash equivalents represent short-term, highly liquid
investments which are readily convertible to cash and have maturities of three
months or less at the time of purchase. The carrying values of these assets
approximate their fair values. As a result of the Company's cash management
system, checks issued and presented to the banks for payment may create negative
cash balances. Checks outstanding in excess of related cash balances totaling
approximately $90.6 million at December 31, 1998 and $78.9 million at December
31, 1997 are included in trade accounts payable.

F-7

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

1. Summary of Significant Accounting Policies (continued)

Inventories. Inventories are valued at the lower of cost or market (net
realizable value) and the cost is principally determined on the last-in,
first-out basis (LIFO).

Property, Plant and Equipment. Property, plant and equipment are stated at
historical cost less accumulated depreciation. Major renewals and betterments
that extend the life of an asset are capitalized and repairs and maintenance
expenditures are charged to expense as incurred. Depreciation is computed using
the straight-line method over the estimated useful lives of depreciable assets.
The principal estimated useful lives are 35 years for buildings and range
between 3 to 18 years for machinery and equipment. Leasehold improvements are
amortized over the shorter of the life of the related asset or the life of the
lease.

The carrying value of property, plant and equipment is assessed annually and/or
when factors indicating an impairment are present. Impairment losses will be
recognized when events or changes in circumstances indicate that the
undiscounted cash flows generated by the assets are less than the carrying value
of such assets. Impairment losses are then measured by comparing the fair value
of such assets to their carrying amount.

Goodwill. The Company has classified as goodwill the cost in excess of fair
value of net assets acquired in purchase transactions. Goodwill is stated at
cost less accumulated amortization. Amortization is computed on a straight-line
basis principally over 40 years. The Company periodically evaluates the
existence of goodwill impairment to assess whether goodwill is fully recoverable
from projected, undiscounted net cash flows of the related business unit.
Impairments would be recognized in operating results if a permanent reduction in
value was to occur. Accumulated amortization of goodwill at December 31, 1998
and 1997 was $12.6 million and $9.4 million, respectively.

Other Assets. Other assets consist principally of debt issuance costs which are
being amortized on a straight-line basis over the terms of the related debt
agreements (6 to 12 years). Other intangible assets are amortized over their
expected useful lives using the straight-line method.

Income Taxes. The Company accounts for income taxes using the liability method
in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." The provision for income taxes includes federal,
state, and foreign income taxes currently payable and those deferred because of
temporary differences between the financial statement and tax bases of assets
and liabilities.

F-8

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

1. Summary of Significant Accounting Policies (continued)

Stock Based Compensation. The Company has elected to follow Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees" and related interpretations, in accounting for its employee stock
options. Under APB No. 25, no compensation expense is recognized when the
exercise price of employee stock options equals the market price of the
underlying stock on the date of grant.

Earnings Per Share. Earnings per share amounts for all periods presented conform
to the requirements of SFAS No. 128, "Earnings Per Share." SFAS No. 128 requires
the disclosure of basic and diluted earnings per share. Basic earnings per share
is computed by dividing income available to common stockholders (the numerator)
by the weighted average number of common shares outstanding (the denominator)
for the period. The computation of diluted earnings per share is similar to
basic earnings per share, except that the denominator is increased to include
the number of additional common shares that would have been outstanding if the
potentially dilutive common shares had been issued. See Note 15.

Comprehensive Income. Effective January 1, 1998, the Company adopted SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
the reporting and display of comprehensive income and its components. The
adoption of this pronouncement had no impact on the Company's results of
operations or stockholders' equity. Prior year's financial statements have been
reclassified to conform with its requirements. See Note 13.

Segment Reporting. In 1998 the Company also adopted SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." SFAS No. 131
establishes standards for the reporting of information related to operating
segments. In accordance with the requirements of SFAS No. 131, the Company
revised its disclosure to separate the specialty packaging business from the
metal food container segment. Applicable information for 1997 and 1996 has been
restated from the prior years' presentations in order to conform to the current
year presentation. See Note 17.

Pension and Other Postretirement Benefits. Effective December 31, 1998, the
Company adopted SFAS No. 132, "Employers' Disclosure about Pensions and Other
Postretirement Benefits." SFAS No. 132 revises financial statement disclosures
regarding pension and postretirement benefit plans, but does not change the
measurement or recognition of those plans. The Company has conformed prior
years' disclosures to meet the new requirements. See Note 9.

F-9

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

1. Summary of Significant Accounting Policies (continued)

New Accounting Standards. In June 1998, the Financial Accounting Standards Board
("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, requiring recognition of all derivatives
as either assets or liabilities in the statement of financial position and
measurement of those instruments at fair value. As required, the Company will
adopt SFAS No. 133 in 2000 and does not anticipate that this pronouncement will
have a material impact on the Company's consolidated financial statements.

2. Acquisitions

In January 1998, the Company acquired substantially all of the assets of Winn
Packaging Co. ("Winn"), a privately held manufacturer and marketer of decorated
rigid plastic containers serving the personal care, automotive, and household
chemical markets.

In June 1998, the Company acquired from Campbell Soup Company ("Campbell") a
wholly owned subsidiary of Campbell into which Campbell had transferred
substantially all of its assets used in its steel container manufacturing
business ("CS Can"). As part of the transaction, the Company and Campbell
entered into a ten-year supply agreement under which the Company has agreed to
sell to Campbell substantially all of Campbell's steel container requirements to
be used for the packaging of foods and beverages in the United States.

In August 1998, the Company acquired all of the outstanding capital stock of
Clearplass Containers, Inc. ("Clearplass"). Clearplass was a privately held
manufacturer and marketer of rigid plastic containers serving the personal care
and pharmaceutical industries.

The Company financed the aggregate purchase price of $194.0 million for its 1998
acquisitions principally through revolving loan borrowings under its U.S. bank
credit agreement. The excess of the aggregate purchase price over the estimated
fair market value of net assets acquired of $44.7 million for the 1998
acquisitions has been recorded as goodwill and is being amortized principally
over 40 years.

F-10

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

2. Acquisitions (continued)

In April 1997, the Company acquired the aluminum roll-on closure business of
Alcoa Closure Systems International, Inc. In April 1997, the Company also
acquired the North American plastic container business of Rexam plc and Rexam
Plastics Inc. The aggregate purchase price for these acquisitions was $42.6
million. The excess of the aggregate purchase price over the fair market value
of net assets acquired of $2.7 million has been recorded as goodwill and is
being amortized over 40 years.

In October 1996, the Company acquired substantially all of the assets of Finger
Lakes Packaging Company, Inc. ("Finger Lakes"), a metal food container
manufacturer, for $30.1 million. The excess of the purchase price over the fair
value of the net assets acquired of $9.8 million has been recorded as goodwill
and is being amortized over 20 years.

The aggregate purchase prices have been allocated to the assets acquired and
liabilities assumed based on their estimated fair values on the dates of
acquisition. The purchase price allocations for the CS Can and Clearplass
acquisitions are preliminary and have been allocated to the tangible and
intangible assets acquired and liabilities assumed based on their estimated fair
values as determined from preliminary appraisals and valuations. The purchase
price allocations for such acquisitions will be finalized within one year of
their acquisition dates. Any differences between the actual and preliminary
valuations will cause adjustments to the purchase price allocations. The
purchase price allocations for the 1998 and 1997 acquisitions are as follows:

1998 1997
---- ----
(Dollars in thousands)

Working capital, net ............................ $ 17,714 $ 8,561
Property, plant & equipment ..................... 136,367 38,356
Deferred tax asset .............................. 179 676
Goodwill ........................................ 44,694 2,677
Other liabilities ............................... (4,920) (7,709)
------------ ------------
Purchase price ............................. $194,034 $ 42,561
============ ============

F-11

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

2. Acquisitions (continued)

Each of the acquisitions referred to above was accounted for using the purchase
method of accounting, and accordingly the results of operations for each
respective acquisition have been included in the consolidated financial
statements of the Company from the date of acquisition. Each of the acquisitions
was financed primarily through bank revolving loan borrowings.

Set forth below are the Company's summary unaudited pro forma results of
operations for the years ended December 31, 1998 and 1997. The unaudited pro
forma results of operations of the Company for the year ended December 31, 1998
include the historical results of the Company, and give pro forma effect to the
acquisitions of Clearplass and CS Can as if those acquisitions occurred as of
the beginning of 1998. The unaudited pro forma results of operations of the
Company for the year ended December 31, 1997 include the historical results of
the Company, and give pro forma effect to the acquisitions of Clearplass, CS
Can, Winn, the North American plastic container business of Rexam plc and the
aluminum roll-on closure business of Alcoa Closure Systems International, Inc.
as if each acquisition occurred as of the beginning of 1997. The pro forma
adjustments made to the Company's historical results of operations for the year
ended December 31, 1998 and 1997 also reflect the effect of purchase accounting
adjustments based upon estimated fair values determined by appraisals and
valuations, the financing of the acquisitions by the Company, and certain other
adjustments as if these events had occurred as of the beginning of 1998 or 1997,
as the case may be. The pro forma adjustments are based upon available
information and upon certain assumptions that the Company believes are
reasonable.

The pro forma results of operations do not give effect to adjustments for
decreased costs from manufacturing synergies resulting from the integration of
these acquisitions with the Company's existing manufacturing operations.
Additionally, the pro forma results of operations for 1997, which include the
incremental borrowings costs incurred to finance acquisitions, do not reflect
the benefit realized by the Company from its July 1997 refinancing of its U.S.
bank credit facility. If the 1997 pro forma results of operations had been based
upon the weighted average 1998 bank borrowing rates, 1997 pro forma earnings
would have increased $.08 per diluted share.

The unaudited pro forma results of operations do not purport to represent what
the Company's results of operations would actually have been had the
acquisitions in fact occurred on January 1, 1998 or January 1, 1997, as the case
may be, or to project the Company's results of operations for any future period.

F-12

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

2. Acquisitions (continued)
Pro forma
Years ended December 31,
1998 1997
---- ----
(Dollars in thousands)

Net sales .............................. $1,841,379 $1,799,493
Income from operations ................. 161,751 147,178
Income before income taxes ............. 74,529 50,517
Income before extraordinary charge ..... 47,009 55,089
Net income ............................. 47,009 35,483

Diluted earnings per common share:
Income before extraordinary charge .. $2.36 $2.79
Net income .......................... 2.36 1.80

3. Inventories

The components of inventories at December 31, 1998 and 1997 consist of the
following:

1998 1997
---- ----
(Dollars in thousands)

Raw materials .......................... $ 34,224 $ 33,706
Work-in-process ........................ 52,415 43,529
Finished goods ......................... 147,339 121,369
Spare parts and other .................. 10,927 8,382
-------- --------
244,905 206,986
Adjustment to value inventory
at cost on the LIFO method .......... 5,180 2,977
-------- --------
$250,085 $209,963
======== ========

The amount of inventory recorded on the first-in first-out method at December
31, 1998 and 1997 was $16.2 million and $15.4 million, respectively.

F-13

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

4. Property, Plant and Equipment

Property, plant and equipment at December 31, 1998 and 1997 consist of the
following:

1998 1997
---- ----
(Dollars in thousands)

Land ................................... $ 7,140 $ 7,217
Buildings and improvements ............. 98,009 92,467
Machinery and equipment ................ 890,131 706,062
Construction in progress ............... 56,021 37,573
-------- --------
1,051,301 843,319
Accumulated depreciation ............... (379,835) (311,554)
---------- ----------
Property, plant and equipment, net $ 671,466 $ 531,765
========== ==========

5. Other Assets

Other assets at December 31, 1998 and 1997 consist of the following:

1998 1997
---- ----
(Dollars in thousands)

Debt issuance costs .................... $14,905 $14,910
Intangible pension asset ............... 10,707 1,155
Other .................................. 5,547 5,085
------- -------
31,159 21,150
Less: accumulated amortization ........ (2,386) (782)
-------- -------
$28,773 $20,368
======= =======

In connection with the refinancing of principally all of its outstanding
indebtedness in 1997, the Company wrote off unamortized debt financing costs of
$18.2 million and capitalized $13.0 million of new debt issuance costs.
Amortization expense relating to debt issuance costs is included in interest
expense and other related financing costs.

F-14

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

6. Long-Term Debt

Debt obligations at December 31, 1998 and 1997 consist of the following:

1998 1997
---- ----
(Dollars in thousands)
Bank Debt:
Bank Revolving Loans .............. $135,900 $ --
Bank A Term Loans ................. 223,900 235,714
Bank B Term Loans ................. 192,449 199,000
Canadian Bank Facility ............ 15,586 14,334
------- -------
Total bank debt ................ 567,835 449,048

Subordinated Debt:
9% Senior Subordinated Debentures . 300,000 300,000
13 1/4% Subordinated Debentures ... 56,206 56,206
Other ............................. 3,000 --
-------- --------
Total subordinated debt ........ 359,206 356,206
-------- -------
Total Debt ............................. 927,041 805,254
Less: Amounts due within one year 36,065 20,218
-------- --------
$890,976 $785,036
======== ========

The aggregate annual maturities of outstanding debt obligations at December 31,
1998 are as follows (dollars in thousands):

1999........................... $ 36,065
2000........................... 39,185
2001........................... 44,507
2002........................... 60,472
2003........................... 207,016
2004 and thereafter............ 539,796
-------
$927,041
========

DEBT OBLIGATIONS

Bank Credit Agreement

In July 1997, the Company refinanced the indebtedness outstanding under its
previous bank credit agreement with proceeds from a new $1.0 billion senior
secured credit facility (the "Credit Agreement"). The Credit Agreement initially
provided the Company with (i) $250.0 million of A Term Loans, (ii) $200.0
million of B Term Loans and (iii) up to $550.0 million of Revolving Loans.

F-15

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

6. Long-Term Debt (continued)

Bank Credit Agreement (continued)

The A Term Loans and Revolving Loans mature on December 31, 2003 and the B Term
Loans mature on June 30, 2005. Principal on the A Term Loans and B Term Loans is
required to be repaid in scheduled annual installments. Amounts repaid on the
term loans may not be reborrowed. Principal repayments of $11.8 million and
$14.3 million on the A Term Loans and $6.6 million and $1.0 million on the B
Term Loans were made during the years ended December 31, 1998 and 1997,
respectively.

The Credit Agreement provides that the Company is required to prepay the term
loans with proceeds received from the incurrence of indebtedness, except
proceeds used to refinance other existing indebtedness; with proceeds received
from certain assets sales; and, under certain circumstances, with 50% of the
Company's excess cash flow. Generally, prepayments are allocated pro rata to the
A Term Loans and B Term Loans and applied first to the scheduled amortization
payments in the year of such prepayments and, to the extent in excess thereof,
pro rata to the remaining installments of the term loans.

The Credit Agreement provides the Company with a commitment for a revolving
credit facility of up to $545.5 million (after giving effect to the reduction of
such facility by $4.5 million for the revolving loan commitment under the
Company's Canadian credit facility) for working capital needs and other general
corporate purposes, including acquisitions. Revolving Loans may be borrowed,
repaid, and reborrowed over the life of the Credit Agreement until final
maturity. At December 31, 1998, there were $135.9 million of Revolving Loans
outstanding and, after taking into account outstanding letters of credit of
$10.4 million, borrowings available under the U.S. revolving credit facility
were $399.2 million. The Company does not anticipate repaying the outstanding
Revolving Loan borrowings prior to December 31, 1999 and, therefore, has
recorded such borrowings as long-term debt. Seasonal Revolving Loan borrowings
during the year will be classified as current obligations.

The Company may utilize up to a maximum of $30.0 million of its U.S. revolving
credit facility for letters of credit as long as the aggregate amount of
borrowings of Revolving Loans and letters of credit do not exceed the amount of
the commitment under the U.S. revolving credit facility. The Credit Agreement
provides for the payment of a commitment fee ranging from 0.15% to 0.375%
(0.3125% at December 31, 1998) per annum on the daily average unused portion of
commitments available under the U.S. revolving credit facility and at December
31, 1998 a 1.50% per annum fee on outstanding letters of credit.

F-16

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

6. Long-Term Debt (continued)

Bank Credit Agreement (continued)

The borrowings under the Credit Agreement may be designated as Base Rate or
Eurodollar Rate borrowings. The Base Rate is the higher of (i) 1/2 of 1.0% in
excess of the Adjusted Certificate of Deposit Rate, as defined in the Credit
Agreement, (ii) 1/2 of 1.0% in excess of the Federal Funds Rate, or (iii)
Bankers Trust Company's prime lending rate. Currently, Base Rate borrowings bear
interest at the Base Rate plus a margin of 0.25% in the case of A Term Loans and
Revolving Loans and at the Base Rate plus a margin of 0.75% in the case of B
Term Loans. Eurodollar Rate borrowings currently bear interest at the Eurodollar
Rate plus a margin of 1.25% in the case of A Term Loans and Revolving Loans and
a margin of 1.75% in the case of B Term Loans. In accordance with the Credit
Agreement, the interest rate margin on Base Rate and Eurodollar Rate borrowings
will be reset quarterly based upon the Company's Leverage Ratio, as defined in
the Credit Agreement. As of December 31, 1998, the interest rate for Base Rate
borrowings was 8.0% and the interest rate for Eurodollar Rate borrowings ranged
between 6.38% and 6.88%. The Company has entered into interest rate swap
agreements to convert interest rate exposure from variable to fixed rates of
interest on A Term Loans and B Term Loans in an aggregate notional amount of
$200.0 million (for a discussion of the interest rate swap agreements, see Note
7).

For 1998, 1997 and 1996, the average amount of borrowings under the Company's
revolving credit facilities was $197.5 million, $89.2 million, and $104.1
million, respectively; the weighted average annual interest rate paid on such
borrowings was 6.7%, 7.8%, and 8.4%, respectively; and the highest amount of
such borrowings was $372.0 million, $182.2 million, and $175.1 million,
respectively.

The indebtedness under the Credit Agreement is guaranteed by Holdings and
certain of its U.S. subsidiaries and is secured by a security interest in
substantially all of their real and personal property. The stock of certain of
the Company's U.S. subsidiaries has been pledged to the lenders under the Credit
Agreement. At December 31, 1998, the Company had assets of a U.S. subsidiary of
$132.4 million which were restricted and could not be transferred to Holdings or
any other subsidiary of Holdings.

F-17

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

6. Long-Term Debt (continued)

Bank Credit Agreement (continued)

The Credit Agreement contains various covenants which limit, among other things,
the ability of the Company and its subsidiaries to grant liens, sell assets and
use the proceeds from certain asset sales, make certain payments (including
dividends) on its capital stock, incur indebtedness or provide guarantees, make
loans or investments, enter into transactions with affiliates, make capital
expenditures, engage in any business other than the packaging business, and,
with respect to the Company's subsidiaries, issue stock. In addition, the
Company is required to meet specified financial covenants including Interest
Coverage and Leverage Ratios, each as defined in the Credit Agreement. The
Company is currently in compliance with all covenants under the Credit
Agreement.

Canadian Bank Facility

In December 1997, the Company, through a wholly owned Canadian subsidiary,
entered into a Canadian bank facility (the "Canadian Bank Facility") with
various Canadian banks. The Canadian Bank Facility provided the Company's
Canadian subsidiaries with Cdn. $26.5 million (U.S. $18.5 million) of term
loans, and provides such subsidiaries with up to Cdn. $6.5 million (U.S. $4.5
million) of revolving loans. In January 1998, the Company borrowed Cdn. $6.0
million (U.S. $4.2 million) of term loans under the Canadian Bank Facility to
complete its draw down of the term facility. Principal on the term loans is
required to be repaid in annual installments until maturity on December 31,
2003. During 1998 the Company repaid Cdn. $2.7 million (U.S. $1.7 million) of
term loans in accordance with terms of the Canadian Bank Facility.

The revolving loans may be borrowed, repaid, and reborrowed until maturity on
December 31, 2003. There were no revolving loan borrowings outstanding at
December 31, 1998.

Revolving loan and term loan borrowings may be designated as Canadian Prime Rate
or Bankers Acceptance borrowings. Currently, Canadian Prime Rate borrowings bear
interest at the Canadian Prime Rate, as defined in the Canadian Bank Facility,
plus a margin of 0.25%. Bankers Acceptance borrowings bear interest at the rate
for bankers acceptances plus a margin of 1.125%. Similar to the Credit
Agreement, the interest rate margin on both Canadian Prime Rate and Bankers
Acceptance borrowings will be reset quarterly based upon the Company's
consolidated Leverage Ratio. As of December 31, 1998, the interest rate for
Bankers Acceptance borrowings ranged from 6.14% to 6.18%. There were no Canadian
Prime Rate borrowings outstanding at December 31, 1998.

F-18

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

6. Long-Term Debt (continued)

Canadian Bank Facility (continued)

The indebtedness under the Canadian Bank Facility is guaranteed by Holdings
and certain of its subsidiaries and is secured by a security interest in
substantially all of the real and personal property of the Company's Canadian
subsidiaries and all of the stock of the Company's Canadian subsidiaries. The
Canadian Bank Facility contains covenants which are generally no more
restrictive than and are generally similar to the covenants in the Credit
Agreement.

9.0% Senior Subordinated Debentures

In June 1997, Holdings issued $300.0 million aggregate principal amount of 9.0%
Senior Subordinated Debentures (the "9% Debentures") due June 1, 2009. The 9%
Debentures represent general unsecured obligations of Holdings, subordinate in
right of payment to obligations under the Credit Agreement and the Canadian Bank
Facility and effectively subordinate to all obligations of the subsidiaries of
Holdings. Interest on the 9% Debentures is payable semi-annually in cash on the
first day of each June and December.

The 9% Debentures are redeemable, at the option of Holdings, in whole or in
part, at any time after June 1, 2002 at the following redemption prices
(expressed in percentages of principal amount) plus accrued and unpaid interest
thereon to the redemption date if redeemed during the twelve month period
beginning June 1 of the years set forth below:

Year Redemption Price
---- ----------------
2002........................... 104.500%
2003........................... 103.375%
2004........................... 102.250%
2005........................... 101.125%
2006 and thereafter............ 100.000%

In addition, at any time on or prior to June 1, 2000, up to 35% of the aggregate
principal amount of the 9% Debentures may be redeemed, at the option of
Holdings, with the proceeds of one or more equity offerings by Holdings of its
common stock at 109% of their principal amount, plus accrued and unpaid interest
to the redemption date.

Upon the occurrence of a Change of Control (as defined in the Indenture
relating to the 9% Debentures), Holdings is required to make an offer to
purchase the 9% Debentures at a purchase price equal to 101% of their principal
amount, plus accrued and unpaid interest to the date of purchase.

F-19

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

6. Long-Term Debt (continued)

9% Senior Subordinated Debentures (continued)

The Indenture relating to the 9% Debentures contains covenants which are
generally less restrictive than those under the Credit Agreement and Canadian
Bank Facility.

13 1/4% Subordinated Debentures

In June 1997, Holdings exchanged its outstanding 13 1/4% Cumulative Exchangeable
Redeemable Preferred Stock (the "Preferred Stock") with a par value of $1,000
per share and a total liquidation value of $56.2 million for a like principal
amount of 13 1/4% Subordinated Debentures due 2006 (the "13 1/4% Debentures").
The 13 1/4% Debentures are general obligations of Holdings, subordinate in right
of payment to all Senior Indebtedness (as defined in the Indenture relating to
the 13 1/4% Debentures), including indebtedness under the Credit Agreement, the
Canadian Bank Facility and the 9% Debentures, and effectively subordinate to all
obligations of the subsidiaries of Holdings.

Interest on the 13 1/4% Debentures is payable semi-annually on each January 15
and July 15 in cash or, on or prior to July 15, 2000, at the option of Holdings,
in additional 13 1/4% Debentures in an aggregate principal amount equal to such
interest. From and after July 15, 2000, interest is payable only in cash.
Interest due on the 13 1/4% Debentures has been paid in cash.

The Preferred Stock holders were entitled to receive cumulative dividends of 13
1/4% per annum, which were payable quarterly in cash or, on or prior to July 15,
2000 at the sole option of Holdings, in additional shares of Preferred Stock.
Dividend payments of $3.2 million in 1997 and $3.0 million in 1996 were paid in
additional shares of Preferred Stock.

The 13 1/4% Debentures may be redeemed at any time on or after July 15, 2000, in
whole or in part, at the option of Holdings at the following redemption prices
(expressed in percentages of principal amount) plus accrued and unpaid interest
thereon to the redemption date if redeemed during the twelve month period
beginning July 15 in each of the years set forth below:

Year Redemption Price
---- ----------------
2000........................... 109.938%
2001........................... 106.625%
2002........................... 103.313%
2003 and thereafter............ 100.000%

F-20

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

6. Long-Term Debt (continued)

13 1/4% Subordinated Debentures (continued)

In addition, on or prior to July 15, 2000, Holdings may redeem all (but not less
than all) outstanding 13 1/4% Debentures at a redemption price equal to 110% of
their principal amount, plus accrued and unpaid interest to the redemption date,
from proceeds of any sale of its common stock.

Upon the occurrence of a Change of Control (as defined in the Indenture relating
to the 13 1/4% Debentures), Holdings is required to make an offer to purchase
all of the 13 1/4% Debentures at a purchase price equal to 101% of their
principal amount, plus accrued and unpaid interest to the date of purchase.

The Indenture relating to the 13 1/4% Debentures contains covenants which are
generally comparable to or less restrictive than those under the Indenture
relating to the 9% Debentures.

REFINANCINGS

During 1996 and 1997 the Company refinanced principally all of its outstanding
indebtedness with lower cost indebtedness and equity. The Company's refinancings
over those years are summarized below.

1997 Refinancings

In February 1997, the Company used net proceeds of $67.2 million from its
initial public offering (the "Offering") of its common stock to prepay $8.9
million of bank term loans under its previous credit agreement and to redeem the
remaining outstanding 13 1/4% Senior Discount Debentures ("13 1/4% Discount
Debentures") due 2002.

In June 1997, the Company used net proceeds of $291.5 million from the issuance
of the 9% Debentures to repay $148.6 million of bank term loans under its
previous credit agreement and, for a total redemption amount of $142.9 million,
to redeem the entire principal amount ($135.0 million) of the 11 3/4% Senior
Subordinated Notes ("11 3/4% Notes") due 2002.

In July 1997, the Company used proceeds of $452.6 million from the Credit
Agreement to refinance all term loans outstanding under the previous credit
agreement, including term borrowings of $75.0 million made in April 1997.

F-21

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

6. Long-Term Debt (continued)

1997 Refinancings (continued)

In connection with these refinancings, the Company incurred an extraordinary
charge of $16.4 million, net of tax, for the write-off of unamortized debt
financing costs of $18.2 million and premiums of $7.9 million paid upon the
redemption of the 11 3/4% Notes.

1996 Refinancing

In 1996, the Company used proceeds of $125.0 million of term loans and $17.4
million of revolving loans under its previous credit agreement and $12.0 million
of the proceeds received upon the issuance of the Preferred Stock to redeem
$154.4 million principal amount of 13 1/4% Discount Debentures at par.
Additional proceeds of $35.8 million from the issuance of the Preferred Stock
were used to purchase 4,283,286 shares of its Class B common stock pursuant to
its contractual right to purchase such stock for such amount. As a result of the
early redemption of a portion of the 13 1/4% Discount Debentures, the Company
incurred an extraordinary charge of $2.2 million, net of taxes, for the
write-off of unamortized deferred financing costs.

7. Financial Instruments

The Company's financial instruments recorded on the balance sheet include cash
and cash equivalents, accounts receivable, accounts payable, and debt
obligations. Due to their short-term maturity, the carrying amount of cash and
cash equivalents, accounts receivable, and accounts payable approximates fair
market value. The following table summarizes the carrying amounts and estimated
fair values of the Company's remaining financial instruments at December 31,
1998 and 1997 (bracketed amount represents an asset):

1998 1997
----------------- ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
(Dollars in thousands)

Bank debt ......................... $ 567,835 $ 567,835 $ 449,048 $ 449,048
Subordinated debt ................. 356,206 369,889 356,206 371,575
Interest rate swap agreements ..... -- 973 -- (70)

F-22

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

7. Financial Instruments (continued)

Methods and assumptions used in estimating fair values are as follows:

Bank debt: The carrying amounts of the Company's variable rate bank borrowings
for revolving loans and term loans approximate their fair values.

Subordinated debt: The fair value of the Company's fixed rate borrowings which
are comprised of the 9% Debentures and the 13 1/4% Debentures are estimated
based on quoted market prices.

Interest Rate Swap Agreements: The fair value of the interest rate swap
agreements reflect the estimated amounts that the Company would pay or receive
at December 31, 1998 and 1997 in order to terminate the contracts based on
quoted market prices.

Derivative Financial Instruments

In 1996, the Company entered into interest rate swap agreements with various
banks to manage its exposure to interest rate fluctuations. The agreements are
with major financial institutions who are expected to fully perform under the
terms thereof. The interest rate swap agreements effectively convert interest
rate exposure from variable rates to fixed rates of interest without the
exchange of the underlying principal amounts. The interest rate swap agreements
provide for fixed rates of interest based on three month LIBOR ranging from 5.6%
to 6.2%. Notional principal amounts of these agreements total $200.0 million, of
which $100.0 million mature in the first quarter of 1999 and the remainder
mature in the fourth quarter of 1999. The notional amounts are used to measure
the interest to be paid or received and do not represent the amount of exposure
to credit loss. The difference between amounts to be paid or received on
interest rate swap agreements are recorded as adjustments to interest expense.
Net payments of $0.3 million for each of the years ended December 31, 1998, 1997
and 1996 were recorded under these agreements.

The Company does not utilize derivative financial instruments for speculative
purposes. Its use of derivative financial instruments is limited to interest
rate swap agreements which assist in managing exposure to adverse movement in
interest rates on a portion of its indebtedness.

F-23

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

7. Financial Instruments (continued)

Concentration of Credit Risk

The Company derives a significant portion of its revenue from multi-year supply
agreements with many of its customers. Aggregate revenues from its three largest
customers accounted for approximately 34.1% of its net sales in 1998, 28.2% of
its net sales in 1997, and 29.1% of its net sales in 1996. The receivable
balances from these customers collectively represented 30.6% and 21.9% of the
Company's accounts receivable at December 31, 1998 and 1997, respectively. As is
common in the packaging industry, the Company provides extended payment terms
for some of its customers due to the seasonality of the vegetable and fruit pack
business. Exposure to losses is dependent on each customers' financial position.
The Company performs ongoing credit evaluations of its customers' financial
condition and its receivables are not collateralized. The Company maintains an
allowance for doubtful accounts which management believes is adequate to cover
potential credit losses based on customer credit evaluations, collection history
and other information.

8. Commitments

The Company has a number of noncancelable operating leases for office and plant
facilities, equipment and automobiles that expire at various dates through 2020.
Certain operating leases have renewal options. Minimum future rental payments
under these leases are as set forth below for each of the following years
(dollars in thousands):

1999........................... $17,246
2000........................... 16,695
2001........................... 13,455
2002........................... 8,639
2003........................... 6,809
2004 and thereafter............ 22,124
-------
$84,968
=======

Rent expense was approximately $18.2 million in 1998; $15.1 million in 1997; and
$13.9 million in 1996.

F-24

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

9. Pensions and Other Postretirement Benefits

The Company sponsors defined benefit pension and defined contribution plans
which cover substantially all employees, other than union employees covered by
multi-employer defined benefit pension plans under collective bargaining
agreements. Pension benefits are provided based on either a career average,
final pay or years of service formula. With respect to certain hourly employees,
pension benefits are provided for based on stated amounts for each year of
service. It is the Company's policy to fund accrued pension and defined
contribution costs in compliance with ERISA requirements. Assets of the plans
consist primarily of equity and bond funds.

The Company has unfunded defined benefit health care and life insurance plans
that provide postretirement benefits to certain employees. The plans are
contributory, with retiree contributions adjusted annually, and contain cost
sharing features including deductibles and coinsurance. Retiree health benefits
are paid as covered expenses are incurred.

The following table sets forth the funded status of the Company's retirement
plans as of December 31, 1998 and 1997:

F-25

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

9. Pensions and Other Postretirement Benefits (continued)

Pension Benefits Other Benefits
---------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
(Dollars in thousands)

Change in Benefit Obligation

Benefit obligation at beginning of year .......$ 81,023 $ 65,468 $ 36,276 $ 27,610
Service cost ............................... 6,186 5,722 1,022 942
Interest cost .............................. 6,315 5,233 2,511 2,347
Actuarial gains and losses ................. 4,241 1,363 384 1,354
Plan amendments ............................ 10,411 1,519 53 --
Benefits paid .............................. (2,551) (2,285) (1,838) (748)
Contributions by plan participants ......... -- -- 148 156
Acquisitions ............................... -- 4,146 -- 4,615
Divestitures, curtailments or
settlements ............................. (211) (143) -- --
Special termination benefits ............... 2,164 -- -- --
-------- -------- -------- --------
Benefit obligation at end of year ............. 107,578 81,023 38,556 36,276

Change in Plan Assets
Fair value of plan assets at beginning
of year ................................ 62,361 46,320 -- --
Actual return on plan assets ............... 7,436 9,046 -- --
Contributions by employer .................. 7,250 6,534 -- --
Acquisitions ............................... -- 3,662 -- --
Benefits paid .............................. (2,271) (1,946) -- --
Divestitures or settlements ................ -- (240) -- --
Other (expenses) ........................... (943) (1,016) -- --
-------- -------- -------- --------
Fair value of plan assets at end of year ...... 73,833 62,360 -- --

Reconciliation of Funded Status
Funded (Underfunded) Status ................... (33,745) (18,663) (38,556) (36,276)
Unrecognized actuarial loss (gain) ......... (2,446) (5,833) (194) (552)
Unrecognized prior service cost ............ 13,339 3,736 278 252
-------- -------- -------- --------
Net liability .................................$(22,852) $(20,760) $(38,472) $(36,576)
======== ======== ======== ========

Amounts recognized in the statement
of financial position
Accrued benefit cost .......................$(22,852) $(20,760) $(38,472) $(36,576)
Accrued benefit liability .................. (10,730) (1,145) -- --
Intangible asset ........................... 10,710 1,145 -- --
Accumulated other comprehensive
income ................................. 20 -- -- --
-------- -------- -------- --------
Net liability .................................$(22,852) $(20,760) $(38,472) $(36,576)
======== ======== ======== ========

F-26

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

9. Pensions and Other Postretirement Benefits (continued)

Amounts applicable to the Company's pension plan with projected and accumulated
benefit obligations in excess of plan assets at December 31 are as follows:

1998 1997
---- ----
(Dollars in thousands)

Projected benefit obligation..................... $78,552 $56,002
Accumulated benefit obligation................... 70,849 49,894
Fair value of plan assets........................ 50,570 43,048

During 1998 various amendments to the Company's pension plans increased the
benefit obligation by $10.4 million. An amendment to one of the Company's
benefit plans increased the monthly retirement benefit provided for years of
service, resulting in an increase of $8.4 million in the benefit obligation and
$0.3 million in the 1998 net periodic benefit cost. In 1998 the Company also
incurred a special termination benefit expense of $2.1 million associated with
the closing of a plant facility.

The components of the net periodic benefit cost and the weighted average
assumptions as of December 31 are as follows:

Pension Benefits Other Benefits
----------------------------- --------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
(Dollars in thousands)

Components of net periodic
benefit cost:
Service cost ............... $6,186 $5,722 $5,229 $1,022 $ 942 $ 871
Interest cost .............. 6,315 5,233 4,452 2,511 2,347 1,766
Expected long-term return
on plan assets ........ (5,823) (4,513) (3,946) -- -- --
Amortization of prior service
cost .................. 681 399 287 27 23 23
Recognized actuarial gains
and losses ............ (97) (238) 363 25 42 2
Loss due to settlement or
curtailment ........... 2,081 74 48 -- -- --
------ ------ ------ ------ ------ ------
Net periodic benefit cost $9,343 $6,677 $6,433 $3,585 $3,354 $ 2,662
====== ====== ====== ====== ====== ======

F-27

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

9. Pensions and Other Postretirement Benefits (continued)

Pension Benefits Other Benefits
----------------------------- ------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----

Weighted average assumptions
as of December 31:
Discount rate .............. 7.00% 7.25% 7.50% 7.00% 7.25% 7.50%
Expected return on plan
assets ................ 9.00% 9.00% 9.00% -- -- --
Rate of compensation
increase .............. 3.50% 3.75% 4.00% 3.50% 3.75% 4.00%

The assumed health care cost trend rates used to determine the accumulated
postretirement benefit obligation in 1998 ranged from 7.5% to 8.5% for pre-age
65 retirees and 6.75% to 7.5% for post-age 65 retirees, declining gradually to
an ultimate rate of 5.0% in 2009.

Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plan. A one percentage point change in the assumed
health care cost trend rates would have the following effects:

1-Percentage 1-Percentage
Point Increase Point Decrease
(Dollars in thousands)

Effect on service and interest cost
components in 1998 ........................ $ 336 $ (441)
Effect on postretirement benefit obligation
as of 12/31/98 ............................ $3,109 $(2,685)

The Company participates in several multi-employer pension plans which provide
defined benefits to certain of its union employees. The composition of total
pension cost for 1998, 1997, and 1996 in the Company's Consolidated Statements
of Operations is as follows:

1998 1997 1996
---- ---- ----
(Dollars in thousands)

Net periodic pension cost ....................... $ 9,343 $ 6,677 $ 6,433
Contributions to multi-employer
union plans ................................... 4,472 4,223 3,813
------ ------- -------
Total pension costs ......................... $13,815 $10,900 $10,246
====== ======= =======

F-28

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

9. Pensions and Other Postretirement Benefits (continued)

The Company also sponsors defined contribution pension and profit sharing plans
covering substantially all employees. Company contributions to these plans are
based upon employee contributions and operating profitability. Contributions
charged to income for these plans were $5.6 million in 1998, $2.9 million in
1997, and $4.3 million in 1996.

10. Income Taxes

The components of income tax expense (benefit) are as follows:

1998 1997 1996
---- ---- ----
(Dollars in thousands)
Current
Federal .................. $ 8,653 $ 100 $ --
State .................... -- 200 3,000
Foreign .................. 2,100 1,100 300
------- -------- ------
10,753 1,400 3,300
Deferred
Federal .................. 15,967 (16,300) --
State .................... -- (1,600) --
Foreign .................. 164 100 --
------- -------- ------
16,131 (17,800) --
------- -------- ------
$26,884 $(16,400) $3,300
======== ======== ======

Income tax expense (benefit) is included in the financial statements as follows:

1998 1997 1996
---- ---- ----
(Dollars in thousands)
Income before
extraordinary charges ............... $26,884 $ (6,700) $3,300
Extraordinary charges ................. -- (9,700) --
------- -------- ------
$26,884 $(16,400) $3,300
======= ======== ======

F-29

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

10. Income Taxes (continued)

The income tax provision varied from that computed by using the U.S. statutory
rate as a result of the following:

1998 1997 1996
---- ---- ----
(Dollars in thousands)
Income tax expense at the
U.S. federal income tax rate ........ $25,483 $ 6,200 $11,100
State and foreign tax expense,
net of federal income benefit ....... 70 260 2,145
Amortization of goodwill .............. 682 500 621
Change in valuation allowance ......... -- (27,400) (10,566)
Provision for tax contingencies ....... 433 4,040 --
Other ................................. 216 -- --
------- -------- -------
$26,884 $(16,400) $ 3,300
======= ======== =======

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets at December 31, 1998 and 1997
are as follows:

1998 1997
---- ----
(Dollars in thousands)
Deferred tax liabilities:
Tax over book depreciation ................ $ 81,567 $ 71,800
Book over tax basis of assets acquired .... 17,495 19,700
Other ..................................... 6,645 6,076
-------- --------
Total deferred tax liabilities .......... 105,707 97,576

Deferred tax assets:
Book reserves not yet deductible
for tax purposes ........................ 60,879 66,200
Net operating loss carryforwards .......... 56,334 63,400
AMT credit carryforwards ................. 3,854 --
Other ..................................... 542 --
-------- --------
Total deferred tax assets ............... 121,609 129,600
-------- --------

Net deferred tax (assets) ................... $(15,902) $(32,024)
======== ========

F-30

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

10. Income Taxes (continued)

During 1997, the Company determined that it was more likely than not that the
future tax benefits arising from its net operating loss carryforwards would be
realized in future years due to the Company's continued improvement in earnings
and the probability of future taxable income. As a result, in accordance with
SFAS No. 109, the Company recognized an income tax benefit of $27.4 million and
reduced goodwill by $14.9 million by releasing the entire valuation allowance.
In the years prior to 1997, the Company`s net deferred tax asset position had
been offset by a valuation allowance which arose primarily as a result of its
net operating loss carryforwards and net temporary differences.

The Company files a consolidated U.S. federal income tax return which
includes all domestic subsidiaries except CS Can. At December 31, 1998, the
Company had net operating loss carryforwards of approximately $160.0 million
(including $3.0 million from CS Can) which are available to offset future
consolidated taxable income of the group and expire from 2001 through 2012. The
Company also has $3.9 million of alternative minimum tax credits which are
available indefinitely to reduce future tax payments for regular federal income
tax purposes. Pretax income of foreign subsidiaries was $6.3 million in 1998,
$3.1 million in 1997 and $0.6 million in 1996.

11. Acquisition Reserves

As part of its plan to integrate and rationalize the acquired operations of the
Food Metal and Specialty business ("AN Can") of American National Can Company,
the Company established a liability of $49.5 million. The Company's plan
consists primarily of the closing or downsizing of certain manufacturing plants
and the integration of the selling, general and administrative functions of the
former AN Can operations with those of the Company. The Company established
reserves for planned costs, which include approximately $22.6 million related to
employee severance and relocation costs, $3.5 million related to administrative
workforce reductions, and $23.4 million related to plant exit costs and other
acquisition liabilities. Since the acquisition of AN Can in 1995, the Company
incurred expenditures of $0.9 million in 1995, $6.5 million in 1996, $5.8
million in 1997 and $18.2 million in 1998, of which an aggregate of $12.4
million related to administrative workforce reductions and employee severance
and relocation costs and $19.0 million related to plant exit costs and other
acquisition liabilities. The timing of these plant rationalizations and other
restructuring items has been dependent upon, among other things, the expiration
of binding labor obligations assumed by the Company in its acquisition of AN Can
and complexities associated with moving production to other facilities and
qualifying such facilities with customers to meet FDA and such customers'
requirements. Accordingly, these costs will principally be incurred through
2000.

F-31

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

11. Acquisition Reserves (continued)

In connection with the 1998 acquisitions of CS Can, Clearplass and Winn, the
Company has developed plans to integrate these businesses into its operations by
rationalizing certain of the acquired plant operations. Pursuant to these plans,
the Company has accrued liabilities of $6.5 million, of which $5.7 million
relates to plant exit costs and other acquisition liabilities and $0.8 million
relates to employee severance and relocation costs. During 1998, the Company
incurred $0.6 million for plant exit costs and other acquisition costs and $0.3
million for employee severance costs. The timing of these rationalization
activities is dependent upon, among other things, the time required to obtain
necessary environmental permits and approvals in connection with a consent order
with the U.S. Environmental Protection Agency to which the Company is subject as
a result of its acquisition of CS Can and complexities associated with the
transfer of the labor force of Campbell for CS Can to the Company. The Company
expects that principally all of these actions will be completed by the end of
calendar year 2000.

12. Stock Option Plans

The Company has established a stock option plan (the "Plan") for key employees
pursuant to which options to purchase shares of common stock of the Company may
be granted. Similar stock option plans were established at Containers and
Plastics for their key employees. Concurrent with the Offering in February of
1997, all outstanding stock options issued under the Containers and Plastics
plans were converted to stock options under the Plan in accordance with the
terms of such plans, and the Containers and Plastics stock option plans
terminated.

In connection with the Offering, the Company recognized a non-cash, pre-tax
charge of $22.5 million for the excess of fair market value over the grant price
of stock options converted from Holdings' subsidiaries' stock option plans to
the Plan. Under APB No. 25, options granted under the subsidiary plans were
considered variable options with a final measurement date at the time of
conversion. Paid in capital was credited for $25.3 million which represented the
current year charge and amounts accrued in prior years. In addition, the Company
incurred a charge relating to the vesting of benefits under the stock option
plans of $0.8 million in 1996.

The Plan authorizes the granting of options for up to 3,533,417 shares of the
Company's common stock, which options can be non-qualified or incentive stock
options. There are currently options for 1,498,314 shares of the Company's
common stock available for future issuance under the Plan. The exercise price of
the stock options granted under the Plan is the fair market value of the Common
Stock on the date of such grant. Options that have been granted generally vest
ratably over a five year period beginning one year after the grant date and have
a term of ten years.

F-32

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

12. Stock Option Plans (continued)

The following is a summary of stock option activity for each of the three years
in the period ended December 31, 1998:

Number of Weighted Average
Shares Exercise Price

Options outstanding December 31, 1995 .. 1,820,103 $ 2.18
Granted ................................ -- --
Exercised .............................. -- --
Canceled ............................... -- --
---------

Options outstanding December 31, 1996 .. 1,820,103 2.18
Granted ................................ 120,000 26.91
Exercised .............................. -- --
Canceled ............................... -- --
---------

Options outstanding December 31, 1997 .. 1,940,103 3.71
Granted ................................ 95,000 33.92
Exercised .............................. (1,100,580) 2.13
Canceled ............................... -- --
---------
Options outstanding December 31, 1998 .. 934,523 $ 8.64
=========

The number of options exercisable was 645,455, 1,578,952, and 1,465,098;
the weighted average exercise price was $3.12, $2.08, and $2.03; and the
remaining contractual life of options outstanding was 4.8 years, 3.7 years, and
4.3 years at December 31, 1998, 1997, and 1996, respectively. At December 31,
1998, there were 719,523 options outstanding with exercise prices ranging from
$0.56 to $4.43 and 215,000 options outstanding with exercise prices ranging from
$22.13 to $36.75.

The Company applies APB No. 25, Accounting for Stock Issued to Employees,
and related interpretations in accounting for its stock option plan. Had
compensation expense been determined based on the fair value of such awards at
the grant date, consistent with the methods of SFAS No. 123 "Accounting for
Stock-Based Compensation," the Company's total and per share net income would
have been as follows (dollars in thousands, except per share amounts):

F-33

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

12. Stock Option Plans (continued)

1998 1997 1996
---- ---- ----
Net income:
As reported net income ........... $45,924 $30,960 $25,409
Pro forma net income ............. 45,361 30,752 25,377
Basic earnings per share:
As reported earnings per share ... 2.41 1.68 1.45
Pro forma earnings per share ..... 2.39 1.67 1.44
Diluted earnings per share:
As reported earnings per share ... 2.30 1.57 1.37
Pro forma earnings per share ..... 2.27 1.56 1.36

The weighted average fair value of options granted was $14.22 and $10.51 during
1998 and 1997, respectively. The fair value was estimated using a Black-Scholes
option-pricing model based on the following weighted average assumptions for
grants made in 1998 and 1997: risk-free interest rates of 5.6% and 6.1%,
respectively; volatility of 38.6% and 31.2%, respectively; dividend yield of 0%;
and expected lives of 5 years. For purposes of the pro forma disclosures, the
estimated fair values of the options is amortized to expense over the vesting
period of the option which is five years.

13. Comprehensive Income

In 1998 the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income is defined as net income plus other comprehensive income,
which under existing accounting standards includes foreign currency items,
minimum pension liability adjustments and unrealized gains and losses on certain
investments.

Comprehensive income is reported in the Consolidated Statements of
Deficiency in Stockholders' Equity. Amounts included in accumulated other
comprehensive loss at December 31, 1998 and 1997 consist of the following.

1998 1997
---- ----
(Dollars in thousands)

Foreign currency translation .................... $ (703) $ (508)
Additional minimum pension liability ............ (20) --
------- -------
Accumulated other comprehensive loss .......... $ (723) $ (508)
======== =======

F-34

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

14. Deficiency in Stockholders' Equity

In February 1997, the Company completed the Offering and amended its Restated
Certificate of Incorporation to change its authorized capital stock to
100,000,000 shares of Common Stock, par value $.01 per share, and 10,000,000
shares of preferred stock, par value $.01 per share. In addition, the existing
Class A, Class B and Class C Common Stock of Holdings were converted to Common
Stock on a one for one basis, and immediately thereafter Holdings effected a
17.133145 to 1 stock split of its outstanding Common Stock.

In the Offering, the Company sold to the underwriters 3,700,000 previously
unissued shares of Common Stock at an initial public offering price of $20.00
per share, and received net proceeds of $67.2 million. MSLEF II and Bankers
Trust New York Corporation ("BTNY"), existing stockholders of the Company prior
to the Offering, sold to the underwriters 1,317,246 and 157,754 previously
issued and outstanding shares of Common Stock owned by them, respectively. The
Company did not receive any of the proceeds from the sale of the shares of
Common Stock by MSLEF II or BTNY.

During 1998, the Company announced that its Board of Directors authorized the
repurchase by the Company of up to $60.0 million of its Common Stock from time
to time in the open market, through privately negotiated transactions or through
block purchases. The Company's repurchases of Common Stock are recorded as
treasury stock and result in a reduction of stockholders' equity. As of December
31, 1998, the Company had repurchased 1,707,003 shares of its Common Stock for
$43.4 million, which were funded from Revolving Loan borrowings under its Credit
Agreement.

F-35

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

15. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per
share (dollars and shares in thousands, except per share amounts):

1998 1997 1996
---- ---- ----
Numerator:

Income before extraordinary charges ........... $45,924 $50,566 $30,637
Extraordinary charges ......................... -- 16,382 2,222
Preferred stock dividend requirements ......... -- 3,224 3,006
------- ------- -------
Numerator for basic and dilutive
earnings per share - income
available to common stockholders ............ $45,924 $30,960 $25,409
======= ======= =======

Denominator:
Denominator for basic earnings per
share - weighted average shares ............ 19,003 18,397 17,557
Effect of dilutive securities:
Employee stock options ...................... 948 1,326 1,021
------- ------- -------
Denominator for diluted earnings
per share - adjusted weighted
average shares .............................. 19,951 19,723 18,578
======= ======= =======

Basic earnings per common share:
Income before extraordinary charges ........... $2.41 $2.75 $1.75
Extraordinary charges ......................... -- (0.89) (0.13)
Preferred stock dividend requirement .......... -- (0.18) (0.17)
----- ----- -----
Net income per common share ................... $2.41 $1.68 $1.45
===== ===== =====

Diluted earnings per common share:
Income before extraordinary charges ........... $2.30 $2.56 $1.65
Extraordinary charges ......................... -- (0.83) (0.12)
Preferred stock dividend requirement .......... -- (0.16) (0.16)
----- ----- -----
Net income per diluted common share ........... $2.30 $1.57 $1.37
===== ===== =====

F-36

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

15. Earnings Per Share (continued)

Options to purchase 140,000 shares of Common Stock at prices ranging from
$28.875 to $36.75 per share for 1998 and 30,000 shares of Common Stock at $36.75
for 1997, respectively, were outstanding but were not included in the
computation of diluted earnings per share because the exercise price for such
options was greater than the average market price of the Common Stock and,
therefore, the effect would be anti-dilutive.

16. Related Party Transactions

Pursuant to various management services agreements (the "Management Agreements")
entered into between each of Holdings, Containers and Plastics and S&H Inc.
("S&H"), a company wholly owned by Mr. Silver, the Chairman and Co-Chief
Executive Officer of Holdings, and Mr. Horrigan, the President and Co-Chief
Executive Officer of Holdings, S&H provides Holdings and its subsidiaries with
general management, supervision and administrative services.

In consideration for its services, S&H receives a fee of 4.95% (of which 0.45%
is payable to MS & Co.) of Holdings' consolidated earnings before interest,
depreciation, taxes and amortization ("EBIDTA") until EBIDTA has reached the
Scheduled Amount set forth in the Management Agreements, and 3.3% (of which 0.3%
is payable to MS & Co.) after EBIDTA has exceeded the Scheduled Amount up to the
Maximum Amount as set forth in the Management Agreements, plus reimbursement for
all related out-of-pocket expenses. The total amount paid under the Management
Agreements was $5.3 million in 1998, $5.4 million in 1997, and $5.3 million in
1996, and was allocated, based upon EBIDTA, as a charge to operating income of
each business segment. Included in accounts payable for the year ended December
31, 1997 was $0.1 million payable to S&H. Under the terms of the Management
Agreements, the Company has agreed, subject to certain exceptions, to indemnify
S&H and any of its affiliates, officers, directors, employees, subcontractors,
consultants or controlling persons against any loss or damage they may sustain
arising in connection with the Management Agreements.

F-37

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

16. Related Party Transactions (continued)

In connection with the bank financings entered into during 1997 and 1996, the
banks thereunder (including Bankers Trust Company) received fees totaling $2.3
million and $1.6 million, respectively.

As underwriters for the 9% Debentures offering in 1997 and the Preferred Stock
offering in 1996, MS & Co. received as compensation for its services an
aggregate of $9.7 million. In connection with the Offering, the underwriters
(including MS & Co.) received fees totaling $5.2 million.

17. Business Segment Information

The Company is engaged in the packaging industry and has three business
units: metal food containers, plastic containers and specialty packaging. The
metal food containers segment manufactures steel and aluminum food containers.
The plastic container segment manufactures custom designed PET and HDPE
containers mainly for health and personal care products. The specialty packaging
business includes the manufacture and sale of steel caps and closures, aluminum
roll-on closures, plastic bowls and paperboard containers used by processors in
the food and beverage industry as well as the costs associated with the
development of new proprietary closure technology. These segments are strategic
business operations that offer different products. Each are managed separately
because each business produces a packaging product requiring different
technology, production, and marketing strategies. Each segment operates
primarily in North America. There are no intersegment sales.

The accounting policies of the reportable segments are the same as those
described in Note 1 of Notes to Consolidated Financial Statements. The Company
evaluates performance of the respective business units based upon earnings
before interest, taxes, depreciation and amortization ("EBITDA"). The Company
believes EBITDA provides important information in enabling it to assess its
ability to service and incur debt. EBITDA is not intended to be a measure of
profitability in isolation or as a substitute for net income or other operating
income data prepared in accordance with Generally Accepted Accounting Principles
("GAAP").

Presented below is a table setting forth reportable business segment profit or
loss and assets for each of the past three years for the Company's three
business segments:

F-38

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

17. Business Segment Information (continued)

Metal Food Plastic Specialty
Containers Containers Packaging Other(1) Total
--------- ---------- --------- -------- -----
(Dollars in millions)
1998
- ----

Net sales ..................... $1,299.0 $310.9 $128.8 $ -- $1,738.7
EBITDA ........................ 164.4 58.2 12.2 (3.0) 231.8
Depreciation and amortization.. 48.3 20.2 8.9 0.1 77.5
Segment profit (loss) ......... 116.1 38.0 3.3 (3.1) 154.3

Segment assets ................ 817.0 285.8 104.9 -- 1,207.7
Capital expenditures .......... 46.6 34.2 5.3 -- 86.1

1997
- ----
Net sales ..................... $1,134.5 $263.3 $113.6 $ -- $1,511.4
EBITDA ........................ 156.5 46.2 9.6 (1.8) 210.5
Depreciation and amortization.. 38.0 17.7 7.7 -- 63.4
Segment profit (loss) ......... 118.5 28.5 1.9 (1.8) 147.1

Segment assets ................ 719.1 189.9 109.0 -- 1,018.0
Capital expenditures .......... 39.1 14.9 7.8 0.4 62.2

1996
- ----
Net sales ..................... $1,098.6 $216.4 $ 90.7 $ -- $1,405.7
EBITDA ........................ 133.6 33.0 16.2 (1.2) 181.6
Depreciation and amortization.. 37.2 14.6 5.7 -- 57.5
Segment profit (loss) ......... 96.4 18.4 10.5 (1.2) 124.1

Segment assets ................ 677.0 158.5 73.7 -- 909.2
Capital expenditures .......... 32.9 17.6 6.2 0.2 56.9

(1) The other category provides information pertaining to the corporate holding
company.

F-39

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

17. Business Segment Information (continued)

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

1998 1997 1996
---- ---- ----
(Dollars in millions)

Total segment profit ................... $154.3 $147.1 $124.1
Interest expense and other related
financing costs ...................... 81.5 80.7 89.4
Non-cash stock option charge ........... -- 22.5 0.8
------ ------ ------
Income before income taxes .......... $ 72.8 $ 43.9 $ 33.9
====== ====== ======

Total segment assets are reconciled to total assets as follows:

1998 1997 1996
---- ---- ----
(Dollars in millions)

Total segment assets ................... $1,207.7 $1,018.0 $909.2
Deferred tax asset ..................... 15.9 32.0 --
Other assets ........................... 0.4 0.6 4.3
-------- -------- ------
Total assets ........................ $1,224.0 $1,050.6 $913.5
======== ======== ======

Financial information relating to the Company's operations by geographic area is
as follows:

Net Sales
-----------------------------
1998 1997 1996
---- ---- ----
(Dollars in millions)

United States .......................... $1,696.4 $1,476.5 $1,392.3
Canada ................................. 42.3 34.9 13.4
-------- -------- --------
Consolidated ........................ $1,738.7 $1,511.4 $1,405.7
======== ======== ========

Long Lived Assets
------------------------------
1998 1997 1996
---- ---- ----
(Dollars in millions)

United States .......................... $ 759.0 $ 579.2 $ 571.3
Canada ................................. 18.1 19.4 5.6
-------- -------- --------
Consolidated ........................ $ 777.1 $ 598.6 $ 576.9
======== ======== ========

F-40

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

17. Business Segment Information (continued)

Net sales are attributed to the country from which the product was manufactured
and shipped.

Metal food container and specialty packaging sales to Nestle Food Company
accounted for 13.6%, 16.7%, and 17.1% of consolidated net sales of the Company
during the years ended December 31, 1998, 1997, and 1996, respectively. Metal
food container sales to Del Monte Corporation accounted for 11.9%, 11.0%, and
12.0% of consolidated net sales of the Company during the years ended December
31, 1998, 1997, and 1996, respectively.

18. Quarterly Results of Operations (Unaudited)

The following table presents the unaudited quarterly results of operations for
the years ended December 31, 1998 and 1997 (dollars in thousands, except per
share data):

Mar 31 June 30 Sept 30 Dec 31
------ ------- ------- ------

1998
- ----
Net sales ................................... $334,413 $392,791 $561,085 $450,426
Gross profit ................................ 44,324 52,577 75,050 50,472
Net income .................................. 6,669 10,187 21,548 7,520

Basic earnings per common share ........... $0.35 $0.54 $1.12 $0.40

Diluted earnings per common share ......... $0.33 $0.50 $1.08 $0.39

1997
- ----
Net sales ................................... $299,427 $357,584 $493,293 $361,066
Gross profit ................................ 42,719 56,961 68,973 39,254
Income before extraordinary charges ......... 11,047 14,030 21,826 3,663
Net income .................................. 8,550 4,279 14,468 3,663

Basic earnings per common share:
Income before extraordinary charges .... $0.64 $0.75 $1.16 $0.19
Extraordinary charges .................. (0.04) (0.44) (0.39) --
Preferred stock dividend requirement ... (0.10) (0.08) -- --
----- ----- ----- -----
Net income per common share ............ $0.50 $0.23 $0.77 $0.19
===== ===== ===== =====

Diluted earnings per common share:
Income before extraordinary charges .... $0.60 $0.69 $1.08 $0.18
Extraordinary charges .................. (0.04) (0.41) (0.36) --
Preferred stock dividend requirement ... (0.10) (0.07) -- --
----- ----- ----- -----
Net income per diluted common share .... $0.46 $0.21 $0.72 $0.18
===== ===== ===== =====

F-41

SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

18. Quarterly Results of Operations (continued)

Earnings per common share amounts are computed independently for each quarter
and therefore may not sum to the total for the applicable year. All periods
prior to the fourth quarter of 1997 have been restated to reflect the adoption
of SFAS No. 128.

The results of operations for the first quarter of 1997 include a charge of
$22.5 million, incurred in connection with the Offering, for the conversion of
stock options from the stock option plans of the Company's subsidiaries to stock
options under the Plan. In addition, during the first quarter of 1997 the
Company determined that a portion of the future tax benefits arising from its
net operating loss carryforward would be realized and it recognized an income
tax benefit of $23.2 million.

The results of operations for the first, second and third quarters of 1997
include extraordinary charges, net of tax, of $0.7 million, $8.3 million and
$7.4 million, respectively, for the write-off of unamortized debt financing
costs and premiums paid in connection with the refinancing of the Company's
indebtedness.

F-42

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

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

December 31,
1998 1997
---- ----
ASSETS
- ------
Current assets:
Cash and cash equivalents ......................... $ 22 $ (7)
Notes receivable - subsidiaries ................... 33,987 18,365
Interest receivable - subsidiaries ................ 9,816 10,941
Other current assets .............................. 25 20
-------- --------
Total current assets ............................ 43,850 29,319

Notes receivable-subsidiaries ..................... 738,568 772,555
Deferred tax asset ................................ 77,966 74,353
Other assets ...................................... 403 493
-------- --------
$860,787 $876,720
======== ========

LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
- --------------------------------------------------
Current liabilities:
Current portion of term loans ..................... $ 33,987 $ 18,365
Accrued interest payable .......................... 9,816 10,941
Accounts payable and accrued expenses ............. 858 1,458
-------- --------
Total current liabilities ....................... 44,661 30,764

Excess of distributions over investment
in subsidiaries .................................. 121,810 125,285
Long-term debt ...................................... 738,568 772,555
Other long-term liabilities ......................... 13,056 15,364

Deficiency in stockholders' equity:
Common stock ...................................... 199 189
Additional paid-in capital ........................ 117,911 110,935
Accumulated deficit ............................... (131,940) (177,864)
Accumulated other comprehensive loss .............. (723) (508)
Treasury stock at cost, 1,683,503 shares in 1998 .. (42,755) --
-------- --------
Total deficiency in stockholders' equity ........ (57,308) (67,248)
-------- --------
$860,787 $876,720
======== ========

See Notes to Condensed Financial Statements.

F-43

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT -
Continued

SILGAN HOLDINGS INC. (Parent Company)
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands)

December 31,
1998 1997 1996
---- ---- ----

Net sales ......................................... $ -- $ -- $ --

Cost of goods sold ................................ -- -- --
------- ------- -------

Gross profit ................................. -- -- --

Selling, general and administrative expenses ...... 3,095 1,815 1,226

Non-cash stock option charge ...................... -- 22,522 --
------- ------- -------

Loss from operations ......................... (3,095) (24,337) (1,226)

Interest expense and other related financing
costs, net ...................................... -- 2,349 17,934
------- ------- -------

Loss before income taxes ..................... (3,095) (26,686) (19,160)

Income tax (benefit) .............................. (1,145) (29,000) --
------- ------- -------

Income (loss) before extraordinary charge .... (1,950) 2,314 (19,160)

Extraordinary charges relating to early
extinguishment of debt, net of income taxes ..... -- 16,382 2,222
------- ------- -------

Net loss before preferred stock dividend
requirement and equity in earnings
of consolidated subsidiaries ............. (1,950) (14,068) (21,382)

Equity in earnings of consolidated subsidiaries ... 47,874 48,252 49,797
------- ------- -------

Net income before preferred stock dividend
requirement .............................. 45,924 34,184 28,415

Preferred stock dividend requirement .............. -- 3,224 3,006
------- ------- -------

Net income available to common
stockholders ............................. $45,924 $30,960 $25,409
======= ======= =======

See Notes to Condensed Financial Statements.

F-44

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT -
Continued

SILGAN HOLDINGS INC. (Parent Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

1998 1997 1996
---- ---- ----

Cash flows from operating activities:
Net loss before preferred stock
dividend requirement and equity in
earnings of consolidated subsidiaries ............. $ (1,950) $ (14,068) $ (21,382)
Adjustments to reconcile net loss
before preferred stock dividend requirement
and equity in earnings of consolidated
subsidiaries to net cash provided by
operating activities:
Amortization ................................... -- 193 437
Accretion of discount on discount debentures ... -- -- 12,077
Non-cash stock option charge ................... -- 22,522 --
Deferred income tax (benefit) .................. (1,145) (29,000) --
Extraordinary charges relating to early
extinguishment of debt ....................... -- 16,382 2,222
Changes in assets and liabilities:
Other, net increase ........................ 783 5,353 1,809
-------- --------- ---------
Total adjustments ....................... (362) 15,450 16,545
-------- --------- ---------
Net cash (used in) provided by operating
activities ...................................... (2,312) 1,382 (4,837)
-------- --------- ---------
Cash flows from investing activities:
Decrease (increase) in notes receivable from
subsidiaries ................................... 18,365 (117,650) (95,520)
Cash distribution received from subsidiaries .......... 43,378 59,188 147,539
-------- --------- ---------
Net cash provided by (used in) investing
activities ...................................... 61,743 (58,462) 52,019
-------- --------- ---------

Cash flows from financing activities:
Proceeds from issuance of common stock ................ -- 67,220 --
Proceeds from issuance of long-term debt .............. -- 825,000 125,000
Repayment of long-term debt ........................... (18,365) (822,496) (183,880)
Proceeds from stock option exercises .................. 2,341 -- --
Purchase of treasury stock ............................ (43,378) -- --
Proceeds from issuance of preferred stock ............. -- -- 50,000
Repurchase of common stock ............................ -- -- (35,811)
Debt financing costs .................................. -- (12,781) (2,400)
-------- --------- ---------
Net cash used in financing activities ............... (59,402) (56,943) (47,091)
-------- --------- ---------

Net increase (decrease) in cash and cash
equivalents ......................................... 29 (137) 91
Cash and cash equivalents at beginning of year .......... (7) 130 39
-------- --------- ---------

Cash and cash equivalents at end of year ................ $ 22 $ (7) $ 130
======== ========= =========

See Notes to Condensed Financial Statements.

F-45

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT -
Continued

SILGAN HOLDINGS INC. (Parent Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
For the years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)

1. Basis of Presentation

Silgan Holdings Inc. ("Holdings" or the "Parent Company") has two wholly owned
subsidiaries, Silgan Containers Corporation ("Containers") and Silgan Plastics
Corporation ("Plastics") (collectively with Holdings, the "Company"). Holdings'
investment in its subsidiaries is stated at cost plus its share of the
undistributed earnings/losses of its subsidiaries. The Parent Company's
financial statements should be read in conjunction with the Company's
Consolidated Financial Statements included elsewhere in this Annual Report on
Form 10-K.

The Parent Company's financial statements have been restated for the periods
presented due to the merger of Silgan Corporation and Holdings in June of 1997.

2. Long-Term Debt

Debt obligations of the Parent Company at December 31, 1998 and 1997 consist of
the following:

1998 1997
---- ----
(Dollars in thousands)
Bank Debt:
Bank A Term Loans .................. $223,900 $235,714
Bank B Term Loans .................. 192,449 199,000
-------- --------
Total bank debt ................. 416,349 434,714

Subordinated Debt:
9% Senior Subordinated Debentures .. 300,000 300,000
13 1/4% Subordinated Debentures .... 56,206 56,206
-------- --------
Total subordinated debt ......... 356,206 356,206
-------- --------

Total Debt .............................. 772,555 790,920
Less: Amounts due within one year.. 33,987 18,365
-------- --------
$738,568 $772,555
======== ========

F-46

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT -
Continued

SILGAN HOLDINGS INC. (Parent Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
For the years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)

The aggregate annual maturities of outstanding debt obligations at December 31,
1998 are as follows (dollars in thousands):

1999........................... $ 33,987
2000........................... 36,760
2001........................... 41,736
2002........................... 56,662
2003........................... 66,614
2004 and thereafter............ 536,796
--------
$772,555
========

As of December 31, 1998 and 1997, the obligations of Holdings had been pushed
down to its subsidiaries. Prior to December 31, 1997, a portion of Holdings'
obligations were not obligations of its subsidiaries.

For 1998, Holdings received interest income from its subsidiaries in the same
amount as the interest expense it incurred on its obligations. In 1997 and 1996,
Holding incurred interest expense in excess of interest amounts received from
its subsidiaries, since during such periods it had certain obligations which had
not been pushed down to its subsidiaries.

3. Guarantees

Pursuant to the Credit Agreement, Holdings guarantees all of the indebtedness of
its subsidiaries incurred under the Credit Agreement. Holdings' subsidiaries may
borrow up to $545.0 million of revolving loans under the Credit Agreement.
Holdings' guarantee under the Credit Agreement is secured by a pledge by
Holdings of all of the stock of certain of its U.S. subsidiaries. Holdings also
guarantees all of the indebtedness of its Canadian subsidiaries under the
Canadian Bank Facility. At December 31, 1998, terms loans of Cdn. $23.8 million
were outstanding under the Canadian Bank Facility. In addition, Holdings'
Canadian subsidiaries may borrow up to Cdn. $6.5 million of revolving loans
under the Canadian Bank Facility. Holdings' guarantee under the Canadian Bank
Facility is secured by a pledge by Holdings of all of the stock of its Canadian
subsidiaries.

4. Dividends from Subsidiaries

Cash dividends received by Holdings from its consolidated subsidiaries accounted
for by the equity method were $43.4 million, $59.2 million, and $147.5 million
for the years ended December 31, 1998, 1997, and 1996, respectively.

F-47

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

SILGAN HOLDINGS INC.
For the years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)

Additions
---------

Balance at Charged to Charged Balance
beginning costs and to other at end of
Description of period expenses accounts Deductions period
- ----------- --------- ---------- -------- ---------- ---------

For the year ended December 31, 1998:

Allowance for
doubtful accounts
receivable ...................... $ 3,415 $ 361 $ 57 $ (508)(1) $ 3,325
======= ===== ======= ====== =======

For the year ended December 31, 1997:

Allowance for
doubtful accounts
receivable ...................... $ 4,045 $ 181 $ (297) $ (514)(1) $ 3,415
======= ===== ======= ====== =======

For the year ended December 31, 1996:

Allowance for
doubtful accounts
receivable ...................... $ 4,843 $ 572 $(1,041)(2) $ (329)(1) $ 4,045
======= ===== ======= ====== =======

(1) Uncollectible accounts written off, net of recoveries.

(2) Principally represents the final purchase price allocation for acquisitions.

F-48

INDEX TO EXHIBITS
-----------------

Exhibit No. Exhibit
- ----------- -------

12 Computations of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends for the years ended December 31, 1998,
1997 and 1996.

21 Subsidiaries of the Registrant.

23 Consent of Ernst & Young LLP.

27 Financial Data Schedule for the fiscal year ended December 31, 1998.