Notes to Condensed Consolidated Financial Statements
Note 1 - Nature of Operations and Basis of Presentation
Amcor plc ("Amcor" or the "Company") is a global packaging company that employs approximately 47,000 people across approximately 230 principal manufacturing sites in more than 40 countries. The Company develops and produces a broad range of packaging products including flexible packaging and rigid packaging containers.
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by U.S. GAAP for complete financial statements. It is management's opinion, however, that all material adjustments (consisting of normal recurring accruals) have been made which are necessary for a fair statement of its financial position, results of operations and cash flows. For further information, this Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2020. There have been no material changes in the accounting policies followed by the Company during the current fiscal year other than the adoption of a new accounting pronouncement discussed below.
The Company reclassified prior year comparative figures in the condensed consolidated statement of cash flows to conform to the current year's presentation. This change in presentation did not have an impact on the Company’s financial condition or operating results.
Certain amounts in the Company's notes to condensed consolidated financial statements may not add or recalculate due to rounding.
Note 2 - New Accounting Guidance
Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, which is guidance requiring financial assets, or a group of financial assets measured at amortized cost basis to be presented at the net amount expected to be collected when finalized using a loss methodology known as the current expected credit loss methodology ("CECL"). The allowance for credit losses is a valuation account that will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. This updated guidance impacts loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. The guidance was effective for the Company on July 1, 2020 and was adopted using the modified retrospective approach. The Company changed its disclosures related to credit losses; refer to Note 9, "Trade Receivables, Net".
The cumulative effect of the changes made to our consolidated July 1, 2020 balance sheet related to the adoption of CECL is as follows:
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June 30, 2020
|
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Adjustments Due to Adoption
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July 1, 2020
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Trade receivables, net
|
|
$
|
1,616
|
|
|
$
|
(7)
|
|
|
$
|
1,609
|
|
Deferred tax assets
|
|
135
|
|
|
2
|
|
|
137
|
|
Retained earnings
|
|
246
|
|
|
(5)
|
|
|
241
|
|
Accounting Standards Not Yet Adopted
In December 2019, the FASB issued updated guidance to simplify the accounting for income taxes by removing certain exceptions and improving the consistent application of U.S. GAAP in other tax accounting areas. This guidance is effective for annual reporting periods, and any interim periods within those annual periods, that begin after December 15, 2020 with early adoption permitted. Accordingly, the guidance will be effective for the Company on July 1, 2021. The Company is currently evaluating the impact that this guidance will have on its financial statements and related disclosures.
In March 2020, the FASB issued optional expedients and exceptions to ease the potential burden in accounting for reference rate reform related to contract modifications, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued, subject to meeting certain criteria. The Company is currently evaluating whether to elect the adoption of this optional guidance.
The Company considers the applicability and impact of all ASUs issued by the FASB. The Company determined that all other ASUs not yet adopted to be either not applicable or are expected to have minimal impact on the Company's consolidated financial statements at this time.
Note 3 - Discontinued Operations
On February 11, 2019, the Company received approval from the European Commission ("EC") for the acquisition of Bemis Company, Inc. ("Bemis"). A condition of the approval was an agreement to divest three Bemis medical packaging facilities located in the United Kingdom and Ireland ("EC Remedy"). Upon completion of the Bemis acquisition on June 11, 2019, the Company determined that the EC Remedy met the criteria to be classified as a discontinued operation, in accordance with ASC 205-20, "Discontinued Operations." The sale of the EC Remedy closed on August 8, 2019. The Company recorded a loss on the sale of $9 million, which is the result of the reclassification of accumulated foreign currency translation amounts from accumulated other comprehensive income to earnings from discontinued operations upon sale of the EC Remedy.
The following table summarizes the results of the EC Remedy, classified as discontinued operations, from July 1, 2019 until the sale of the EC Remedy on August 8, 2019:
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Three Months Ended September 30,
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($ in millions)
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2020
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2019
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Net sales
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$
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—
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|
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$
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16
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|
|
|
|
|
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Income (loss) from discontinued operations
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—
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|
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(7)
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Tax expense on discontinued operations
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—
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|
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(1)
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Income (loss) from discontinued operations, net of tax
|
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$
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—
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|
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$
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(8)
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Note 4 - Restructuring Plans
2019 Bemis Integration Plan
In connection with the acquisition of Bemis, the Company initiated restructuring activities in the fourth quarter of 2019 aimed at integrating and optimizing the combined organization. As previously announced, the Company continues to target realizing approximately $180 million of pre-tax synergies driven by procurement, supply chain, and general and administrative savings by the end of fiscal year 2022.
The Company's total 2019 Bemis Integration Plan pre-tax integration costs are expected to be approximately $200 million. The total 2019 Bemis Integration Plan costs include $165 million of restructuring and related expenses and $35 million of general integration expenses. The restructuring and related expenses are comprised of approximately $90 million in employee related expenses, $25 million in fixed asset related expenses, $20 million in other restructuring and $30 million in restructuring related expenses. The breakdown of expenses incurred to date is broadly proportionate to the breakdown by major type of the estimated overall program expenses. The Company estimates that approximately $150 million of the $200 million total integration costs will result in cash expenditures, of which $115 million relate to restructuring and related expenditures. Cash payments for the three months ended September 30, 2020 were $18 million, of which $14 million were payments related to restructuring and related expenditures. Cash payments of approximately $50 million to $55 million are expected for the balance of the fiscal year with $40 million to $45 million representing payments for restructuring and related expenses. The 2019 Bemis Integration Plan relates to the Flexibles segment and Corporate and is expected to be completed by the end of fiscal year 2022.
Restructuring related costs are directly attributable to restructuring activities; however, they do not qualify for special accounting treatment as exit or disposal activities. General integration costs are not linked to restructuring. The Company believes the disclosure of restructuring related costs provides more information on the total cost of our 2019 Bemis Integration Plan. The restructuring related costs relate primarily to the closure of facilities and include costs to replace graphics, train new employees on relocated equipment and anticipated losses on sale of closed facilities.
2018 Rigid Packaging Restructuring Plan
On August 21, 2018, the Company announced a restructuring plan in Amcor Rigid Packaging ("2018 Rigid Packaging Restructuring Plan") aimed at reducing structural costs and optimizing the footprint. The Plan includes the closures of manufacturing facilities and headcount reductions to achieve manufacturing footprint optimization and productivity improvements as well as overhead cost reductions.
The Company's total 2018 Rigid Packaging Restructuring Plan pre-tax restructuring costs are expected to be approximately $110 million with the main component being the cost to exit manufacturing facilities and employee related costs. The Company estimates that approximately $70 million of the $110 million total costs will result in cash expenditures. Cash payments for the three months ended September 30, 2020 were $10 million, with approximately $5 million to $10 million expected during the remainder of the fiscal year. The 2018 Rigid Packaging Restructuring Plan is expected to be substantially completed during fiscal year 2021.
Other Restructuring Plans
The Company has entered into other individually immaterial restructuring plans ("Other Restructuring Plans"). The Company's restructuring charge related to these plans was approximately $9 million and zero for the three months ended September 30, 2020 and 2019, respectively. The Company's total incurred restructuring charge for Other Restructuring Plans primarily relates to the Flexibles reporting segment.
Consolidated Amcor Restructuring Plans
The total costs incurred from the beginning of the Company's material restructuring plans are as follows:
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($ in millions)
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2018 Rigid Packaging Restructuring Plan
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2019 Bemis Integration Plan
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Other Restructuring Plans
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Total Restructuring and Related Expenses (1)
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Fiscal year 2019 net charges to earnings
|
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$
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64
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|
|
$
|
48
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|
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$
|
19
|
|
|
$
|
131
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Fiscal year 2020 net charges to earnings
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|
37
|
|
|
60
|
|
|
18
|
|
|
115
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|
Fiscal year 2021 first quarter net charges to earnings
|
|
8
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|
|
6
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|
|
9
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|
|
23
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|
|
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|
|
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Expense incurred to date
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$
|
109
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|
|
$
|
115
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|
|
$
|
45
|
|
|
$
|
269
|
|
(1)Total restructuring and related expenses includes restructuring related costs from the 2019 Bemis Integration Plan of $15 million and $1 million for fiscal year 2020 and first quarter of fiscal year 2021, respectively.
An analysis of the Company's restructuring plan liability is as follows:
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($ in millions)
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Employee Costs
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Fixed Asset Related Costs
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Other Costs
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Total Restructuring Costs
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Liability balance at June 30, 2020
|
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$
|
70
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|
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$
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3
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|
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$
|
12
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|
|
$
|
85
|
|
Net charges to earnings
|
|
12
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|
|
1
|
|
|
9
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|
|
22
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|
|
|
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Cash paid
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(15)
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(4)
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(7)
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(26)
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|
|
|
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|
|
|
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|
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Foreign currency translation
|
|
(2)
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|
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—
|
|
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—
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|
|
(2)
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|
Liability balance at September 30, 2020
|
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$
|
65
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|
|
$
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—
|
|
|
$
|
14
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|
|
$
|
79
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|
The costs related to restructuring activities have been presented on the consolidated statement of income as restructuring and related expenses. The accruals related to restructuring activities have been recorded on the unaudited condensed consolidated balance sheet under other current liabilities and other non-current liabilities.
Note 5 - Inventories, Net
Inventories, net are summarized as follows:
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($ in millions)
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|
September 30, 2020
|
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June 30, 2020
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Raw materials and supplies
|
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$
|
807
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|
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$
|
809
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Work in process and finished goods
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|
1,087
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|
|
1,127
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Less: inventory reserves
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(110)
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|
|
(104)
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|
Total inventories, net
|
|
$
|
1,784
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|
|
$
|
1,832
|
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Note 6 - Goodwill and Other Intangible Assets, Net
Goodwill
Changes in the carrying amount of goodwill attributable to each reportable segment are as follows:
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($ in millions)
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Flexibles Segment
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Rigid Packaging Segment
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Total
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Balance as of June 30, 2020
|
|
$
|
4,369
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|
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$
|
970
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|
|
$
|
5,339
|
|
|
|
|
|
|
|
|
Currency translation
|
|
41
|
|
|
2
|
|
|
43
|
|
Balance as of September 30, 2020
|
|
$
|
4,410
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|
|
$
|
972
|
|
|
$
|
5,382
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|
There is a $4 million accumulated goodwill impairment loss in the Rigid Packaging reportable segment as of September 30, 2020 and June 30, 2020.
Other Intangible Assets, Net
The components of intangible assets are as follows:
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|
September 30, 2020
|
($ in millions)
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|
Gross Carrying Amount
|
|
Accumulated Amortization and Impairment
|
|
Net Carrying Amount
|
Customer relationships
|
|
$
|
1,963
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|
|
$
|
(305)
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|
|
$
|
1,658
|
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Computer software
|
|
223
|
|
|
(141)
|
|
|
82
|
|
Other (1)
|
|
324
|
|
|
(113)
|
|
|
211
|
|
Balance as of
|
|
$
|
2,509
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|
|
$
|
(558)
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|
|
$
|
1,951
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
($ in millions)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization and Impairment
|
|
Net Carrying Amount
|
Customer relationships
|
|
$
|
1,957
|
|
|
$
|
(264)
|
|
|
$
|
1,693
|
|
Computer software
|
|
218
|
|
|
(131)
|
|
|
87
|
|
Other (1)
|
|
321
|
|
|
(107)
|
|
|
214
|
|
Balance as of
|
|
$
|
2,496
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|
|
$
|
(502)
|
|
|
$
|
1,994
|
|
(1)Other includes $16 million for both September 30, 2020 and June 30, 2020 of acquired intellectual property assets not yet being amortized as the related R&D projects have not yet been completed.
Amortization expense for intangible assets during the three months ended September 30, 2020 and 2019 were $46 million and $74 million, respectively.
Note 7 - Fair Value Measurements
The fair values of the Company’s financial assets and financial liabilities listed below reflect the amounts that would be received to sell the assets or paid to transfer the liabilities in an orderly transaction between market participants at the measurement date (exit price).
The Company’s non-derivative financial instruments primarily include cash and cash equivalents, trade receivables, trade payables, short-term debt and long-term debt. At September 30, 2020 and June 30, 2020, the carrying value of these financial instruments, excluding long-term debt, approximates fair value because of the short-term nature of these instruments.
The fair value of long-term debt with variable interest rates approximates its carrying value. The fair value of the Company’s long-term debt with fixed interest rates is based on market prices, if available, or expected future cash flows discounted at the current interest rate for financial liabilities with similar risk profiles.
The carrying values and estimated fair values of long-term debt with fixed interest rates (excluding capital leases) were as follows:
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|
|
|
|
|
|
|
September 30, 2020
|
|
June 30, 2020
|
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
($ in millions)
|
|
|
(Level 2)
|
|
|
(Level 2)
|
Total long-term debt with fixed interest rates (excluding commercial paper and finance leases)
|
|
$
|
3,527
|
|
|
$
|
3,779
|
|
|
$
|
3,599
|
|
|
$
|
3,793
|
|
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
Additionally, the Company measures and records certain assets and liabilities, including derivative instruments and contingent purchase consideration liabilities, at fair value. The following table summarizes the fair value of these instruments, which are measured at fair value on a recurring basis, by level, within the fair value hierarchy:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
($ in millions)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Forward exchange contracts
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
Interest rate swaps
|
|
—
|
|
|
31
|
|
|
—
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
—
|
|
|
$
|
39
|
|
|
$
|
—
|
|
|
$
|
39
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Contingent purchase consideration liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
15
|
|
Commodity contracts
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
Forward exchange contracts
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
Cross currency interest rate swaps
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value
|
|
$
|
—
|
|
|
$
|
20
|
|
|
$
|
15
|
|
|
$
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
($ in millions)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts
|
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
Interest rate swaps
|
|
—
|
|
|
32
|
|
|
—
|
|
|
32
|
|
Total assets measured at fair value
|
|
$
|
—
|
|
|
$
|
40
|
|
|
$
|
—
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Contingent purchase consideration liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
15
|
|
Commodity contracts
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
Forward exchange contracts
|
|
—
|
|
|
17
|
|
|
—
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
15
|
|
|
$
|
39
|
|
The fair value of the commodity contracts was determined using a discounted cash flow analysis based on the terms of the contracts and observed market forward prices discounted at a currency-specific rate. Forward exchange contract fair values were determined based on quoted prices for similar assets and liabilities in active markets using inputs such as currency rates and forward points. The fair value of the interest rate swaps was determined using a discounted cash flow method based on market-based swap yield curves, taking into account current interest rates.
Contingent consideration obligations arise from business acquisitions. The Company's contingent consideration liabilities consist of an $11 million liability that is contingent on future royalty income generated by Discma AG, a subsidiary acquired in March 2017, with the $4 million balance relating to consideration for another small business acquisition where payment is contingent on the Company vacating a certain property. The fair value of the contingent purchase consideration liabilities was determined for each arrangement individually. The fair value was determined using the income approach with significant inputs that are not observable in the market. Key assumptions include the discount rates consistent with the level of risk of achievement and probability adjusted financial projections. The expected outcomes are recorded at net present value, which requires adjustment over the life for changes in risks and probabilities. Changes arising from modifications in forecast related to contingent consideration are expected to be immaterial.
The fair value of contingent purchase consideration liabilities is included in other current liabilities and other non-current liabilities in the unaudited condensed consolidated balance sheet.
Assets and Liabilities Measured and Recorded at Fair Value on a Nonrecurring Basis
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records assets and liabilities at fair value on a nonrecurring basis as required by U.S. GAAP. The Company measures certain assets, including technology intangible assets, equity method investments and other intangible assets at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired. The fair values of these assets are determined, when applicable, based on valuation techniques using the best information available, and may include quoted market prices, market comparables and discounted cash flow projections.
The Company sold its equity method investment in AMVIG Holdings Limited ("AMVIG") on September 30, 2020. Refer to Note 16, "Disposals".
Similar to the manner in which it tests other intangible assets, the Company tests technology intangibles for impairment when facts and circumstances indicate the carrying value may not be recoverable from their future cash flows. During the three months ended September 30, 2020 and 2019, there were no triggering events and therefore no technology intangible impairment charges recorded.
Note 8 - Derivative Instruments
The Company periodically uses derivatives and other financial instruments to hedge exposures to interest rate, commodity and currency risks. The Company does not hold or issue financial instruments for speculative or trading purposes. For hedges that meet the hedge accounting criteria, the Company, at inception, formally designates and documents the instrument as a fair value hedge or a cash flow hedge of a specific underlying exposure. On an ongoing basis, the Company assesses and documents that its hedges have been and are expected to continue to be highly effective.
Interest Rate Risk
The Company’s policy is to manage exposure to interest rate risk by maintaining a mixture of fixed-rate and variable-rate debt, monitoring global interest rates and, where appropriate, hedging floating interest rate exposure or debt at fixed interest rates through various interest rate derivative instruments, including, but not limited to, interest rate swaps, cross-currency interest rate swaps, and interest rate locks. For interest rate swaps that are accounted for as fair value hedges, changes in the fair value of both the hedging instruments and the underlying debt obligations are immediately recognized in interest expense. Changes in the fair value of interest rate swaps that have not been designated as hedging instruments are reported in the accompanying unaudited condensed consolidated statement of income under other non-operating income (loss), net.
At September 30, 2020 and June 30, 2020, the Company had a notional amount of $100 million cross-currency interest rate swaps outstanding. The Company did not designate the swaps as hedging instruments and thus changes in fair value were immediately recognized in earnings.
As of September 30, 2020, and June 30, 2020, the total notional amount of the Company’s receive-fixed/pay-variable interest rate swaps accounted for as fair value hedges was $852 million and $837 million, respectively.
Foreign Currency Risk
The Company manufactures and sells its products and finances operations in a number of countries throughout the world and, as a result, is exposed to movements in foreign currency exchange rates. The purpose of the Company’s foreign currency hedging program is to manage the volatility associated with the changes in exchange rates.
To manage this exchange rate risk, the Company utilizes forward contracts. Contracts that qualify for hedge accounting are designated as cash flow hedges of certain forecasted transactions denominated in foreign currencies. The effective portion of the changes in fair value of these instruments is reported in accumulated other comprehensive income (loss) ("AOCI") and reclassified into earnings in the same financial statement line item and in the same period or periods during which the related hedged transactions affect earnings. The ineffective portion is recognized in earnings over the life of the hedging relationship in the same unaudited condensed consolidated statement of income line item as the underlying hedged item. Changes in the fair value of forward contracts that have not been designated as hedging instruments are reported in the accompanying unaudited condensed consolidated statement of income.
As of September 30, 2020, and June 30, 2020, the notional amount of the outstanding forward contracts was $1.3 billion and $1.6 billion, respectively.
The Company manages its currency exposure related to the net assets of its foreign operations primarily through borrowings denominated in the relevant currency. Foreign currency gains and losses from the remeasurement of external borrowings designated as net investment hedges of a foreign operation are recognized in AOCI, to the extent that the hedge is effective. The ineffective portion is immediately recognized in other non-operating income (loss), net in the unaudited condensed consolidated statement of income. When a hedged net investment is disposed of, a percentage of the cumulative amount recognized in AOCI in relation to the hedged net investment is recognized in the unaudited condensed consolidated statement of income as part of the profit or loss on disposal.
Commodity Risk
Certain raw materials used in the Company's production processes are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. The Company's policy is to minimize exposure to price volatility by passing through the commodity price risk to customers, including the use of fixed price swaps. The Company purchases on behalf of customers fixed price commodity swaps to offset the exposure of price volatility on the underlying sales contracts. These instruments are cash closed out on maturity and the related cost or benefit is passed through to customers. Information about commodity price exposure is derived from supply forecasts submitted by customers and these
exposures are hedged by a central treasury unit. Changes in the fair value of commodity hedges are recognized in AOCI. The cumulative amount of the hedge is recognized in the unaudited condensed consolidated statement of income when the forecast transaction is realized.
At September 30, 2020 and June 30, 2020, the Company had the following outstanding commodity contracts that were entered into to hedge forecasted purchases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
June 30, 2020
|
Commodity
|
|
Volume
|
|
Volume
|
Aluminum
|
|
39,569 tons
|
|
44,944 tons
|
PET resin
|
|
21,256,000 lbs.
|
|
26,006,000 lbs.
|
The following tables provide the location of derivative instruments in the unaudited condensed consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
Balance Sheet Location
|
|
September 30, 2020
|
|
June 30, 2020
|
Assets
|
|
|
|
|
|
|
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
Commodity contracts
|
|
Other current assets
|
|
$
|
2
|
|
|
$
|
—
|
|
Forward exchange contracts
|
|
Other current assets
|
|
2
|
|
|
2
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
Forward exchange contracts
|
|
Other current assets
|
|
4
|
|
|
6
|
|
|
|
|
|
|
|
|
Total current derivative contracts
|
|
|
|
8
|
|
|
8
|
|
Derivatives in fair value hedging relationships:
|
|
|
|
|
|
|
Interest rate swaps
|
|
Other non-current assets
|
|
31
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current derivative contracts
|
|
|
|
31
|
|
|
32
|
|
Total derivative asset contracts
|
|
|
|
$
|
39
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
Commodity contracts
|
|
Other current liabilities
|
|
$
|
3
|
|
|
$
|
7
|
|
Forward exchange contracts
|
|
Other current liabilities
|
|
5
|
|
|
3
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
Forward exchange contracts
|
|
Other current liabilities
|
|
8
|
|
|
14
|
|
Cross currency interest rate swaps
|
|
Other current liabilities
|
|
5
|
|
|
—
|
|
Total current derivative contracts
|
|
|
|
20
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current derivative contracts
|
|
|
|
—
|
|
|
—
|
|
Total derivative liability contracts
|
|
|
|
$
|
20
|
|
|
$
|
24
|
|
Certain derivative financial instruments are subject to master netting arrangements and are eligible for offset. The Company has made an accounting policy election not to offset the fair values of these instruments within the unaudited condensed consolidated balance sheet.
The following tables provide the effects of derivative instruments on AOCI and in the unaudited condensed consolidated statement of income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
|
|
Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
|
|
|
|
Three Months Ended September 30,
|
|
|
($ in millions)
|
|
|
2020
|
|
2019
|
|
|
|
|
Derivatives in cash flow hedging relationships
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
Cost of sales
|
|
$
|
(3)
|
|
|
$
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury locks
|
|
Interest expense
|
|
(1)
|
|
|
—
|
|
|
|
|
|
Total
|
|
|
|
$
|
(4)
|
|
|
$
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain (Loss) Recognized in the Unaudited Condensed Consolidated Statement of Income
|
|
Gain (Loss) Recognized in Income for Derivatives Not Designated as Hedging Instruments
|
|
|
|
Three Months Ended September 30,
|
|
|
($ in millions)
|
|
|
2020
|
|
2019
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts
|
|
Other income, net
|
|
$
|
7
|
|
|
$
|
—
|
|
|
|
|
|
Cross currency interest rate swaps
|
|
Other income, net
|
|
(4)
|
|
|
(3)
|
|
|
|
|
|
Total
|
|
|
|
$
|
3
|
|
|
$
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain (Loss) Recognized in the Unaudited Condensed Consolidated Statement of Income
|
|
Gain (Loss) Recognized in Income for Derivatives in Fair Value Hedging Relationships
|
|
|
|
Three Months Ended September 30,
|
|
|
($ in millions)
|
|
|
2020
|
|
2019
|
|
|
|
|
Derivatives in fair value hedging relationships
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Interest expense
|
|
$
|
(1)
|
|
|
$
|
—
|
|
|
|
|
|
Total
|
|
|
|
$
|
(1)
|
|
|
$
|
—
|
|
|
|
|
|
Note 9 - Trade Receivables, Net
Trade receivables, net is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
September 30, 2020
|
|
June 30, 2020
|
Trade receivables, gross
|
|
$
|
1,706
|
|
|
$
|
1,651
|
|
Less: Allowance for doubtful accounts
|
|
(33)
|
|
|
(35)
|
|
Trade receivables, net
|
|
$
|
1,673
|
|
|
$
|
1,616
|
|
Allowance for Doubtful Accounts
The changes in allowance for doubtful accounts, including expected credit losses, during the three months ended September 30, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
($ in millions)
|
|
2020
|
|
2019
|
Balance as of June 30
|
|
$
|
(35)
|
|
|
$
|
(34)
|
|
Impact of adoption of ASU 2016-13 ("CECL") (1)
|
|
(7)
|
|
|
—
|
|
Recoveries/(charges) to income
|
|
4
|
|
|
(4)
|
|
Write-offs
|
|
6
|
|
|
—
|
|
Foreign currency and other
|
|
(1)
|
|
|
3
|
|
Balance as of September 30
|
|
$
|
(33)
|
|
|
$
|
(35)
|
|
(1)Refer to Note 2, "New Accounting Guidance" for more information.
The Company determines its allowance for doubtful accounts using a combination of factors, including customer creditworthiness, past transaction history with the customer and changes in customer payment terms or practices. In addition, overall historical collection experience, current economic industry trends and a review of the current status of trade accounts receivable are considered when determining the required allowance for doubtful accounts.
Note 10 - Components of Net Periodic Benefit Cost
Net periodic benefit cost for benefit plans include the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
($ in millions)
|
|
2020
|
|
2019
|
|
|
|
|
Service cost
|
|
$
|
6
|
|
|
$
|
6
|
|
|
|
|
|
Interest cost
|
|
10
|
|
|
12
|
|
|
|
|
|
Expected return on plan assets
|
|
(15)
|
|
|
(18)
|
|
|
|
|
|
Amortization of net loss
|
|
2
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
3
|
|
|
$
|
2
|
|
|
|
|
|
Service cost is included in operating income. All other components of net periodic benefit cost other than service cost are recorded within other non-operating income (loss), net.
Note 11 - Income Taxes
The Company computes its provision for income taxes by applying the estimated annual effective tax rate to year to date income before income taxes and equity in income of affiliated companies and adjusts for discrete tax items recorded in the period.
The provision for income taxes for the three months ended September 30, 2020 and 2019 is based on our projected annual effective tax rate for the respective fiscal years, adjusted for specific items that are required to be recognized in the period in which they are incurred.
Income tax expense for the three months ended September 30, 2020 and 2019 is $61 million and $22 million, respectively.
The effective tax rate for the three months ended September 30, 2020 increased by 2.3 percentage points compared to the three months ended September 30, 2019, from 22.9% to 25.2%. The increase in the income tax provision and the effective tax rate was primarily related to lower tax benefits on integration and restructuring costs and the increase of operating income earned in higher tax jurisdictions.
Note 12 - Shareholders' Equity
The changes in ordinary and treasury shares during the three months ended September 30, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary Shares
|
|
Treasury Shares
|
(shares and $ in millions)
|
|
Number of Shares
|
|
Amount
|
|
Number of Shares
|
|
Amount
|
Balance as of June 30, 2019
|
|
1,626
|
|
|
$
|
16
|
|
|
1
|
|
|
$
|
(16)
|
|
Share buy-back/cancellations
|
|
(6)
|
|
|
—
|
|
|
|
|
|
Options exercised and shares vested
|
|
|
|
|
|
(1)
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury shares
|
|
|
|
|
|
1
|
|
|
(10)
|
|
Balance as of September 30, 2019
|
|
1,620
|
|
|
$
|
16
|
|
|
1
|
|
|
$
|
(11)
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2020
|
|
1,569
|
|
|
$
|
16
|
|
|
7
|
|
|
$
|
(67)
|
|
|
|
|
|
|
|
|
|
|
Options exercised and shares vested
|
|
|
|
|
|
(2)
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2020
|
|
1,569
|
|
|
$
|
16
|
|
|
5
|
|
|
$
|
(49)
|
|
The changes in the components of accumulated other comprehensive income (loss) during the three months ended September 30, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation
|
|
Net Investment Hedge
|
|
Pension
|
|
Effective Derivatives
|
|
Total Accumulated Other Comprehensive Income (Loss)
|
($ in millions)
|
|
(Net of Tax)
|
|
(Net of Tax)
|
|
(Net of Tax)
|
|
(Net of Tax)
|
|
Balance as of June 30, 2019
|
|
$
|
(609)
|
|
|
$
|
(11)
|
|
|
$
|
(90)
|
|
|
$
|
(12)
|
|
|
$
|
(722)
|
|
Other comprehensive income (loss) before reclassifications
|
|
(60)
|
|
|
(2)
|
|
|
—
|
|
|
(1)
|
|
|
(63)
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
9
|
|
|
—
|
|
|
1
|
|
|
2
|
|
|
12
|
|
Net current period other comprehensive income (loss)
|
|
(51)
|
|
|
(2)
|
|
|
1
|
|
|
1
|
|
|
(51)
|
|
Balance as of September 30, 2019
|
|
$
|
(660)
|
|
|
$
|
(13)
|
|
|
$
|
(88)
|
|
|
$
|
(12)
|
|
|
$
|
(773)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2020
|
|
$
|
(896)
|
|
|
$
|
(14)
|
|
|
$
|
(106)
|
|
|
$
|
(34)
|
|
|
$
|
(1,049)
|
|
Other comprehensive income (loss) before reclassifications
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
1
|
|
|
(1)
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
25
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|
31
|
|
Net current period other comprehensive income (loss)
|
|
24
|
|
|
—
|
|
|
2
|
|
|
4
|
|
|
30
|
|
Balance as of September 30, 2020
|
|
$
|
(872)
|
|
|
$
|
(14)
|
|
|
$
|
(104)
|
|
|
$
|
(30)
|
|
|
$
|
(1,019)
|
|
The following tables provide details of amounts reclassified from accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
($ in millions)
|
|
2020
|
|
2019
|
|
|
|
|
Amortization of pension:
|
|
|
|
|
|
|
|
|
Amortization of prior service credit
|
|
$
|
—
|
|
|
$
|
(1)
|
|
|
|
|
|
Amortization of actuarial loss
|
|
2
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total before tax effect
|
|
2
|
|
|
1
|
|
|
|
|
|
Tax benefit on amounts reclassified into earnings
|
|
1
|
|
|
—
|
|
|
|
|
|
Total net of tax
|
|
$
|
3
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gains) losses on cash flow hedges:
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
$
|
3
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury locks
|
|
1
|
|
|
—
|
|
|
|
|
|
Total before tax effect
|
|
4
|
|
|
2
|
|
|
|
|
|
Tax benefit on amounts reclassified into earnings
|
|
—
|
|
|
—
|
|
|
|
|
|
Total net of tax
|
|
$
|
4
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gains) losses on foreign currency translation:
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment (1)
|
|
$
|
25
|
|
|
$
|
9
|
|
|
|
|
|
Total before tax effect
|
|
25
|
|
|
9
|
|
|
|
|
|
Tax benefit on amounts reclassified into earnings
|
|
—
|
|
|
—
|
|
|
|
|
|
Total net of tax
|
|
$
|
25
|
|
|
$
|
9
|
|
|
|
|
|
(1) During the three months ended September 30, 2020, the Company recorded a gain on disposal of AMVIG and other non-core businesses. Upon completion of the sales, $25 million of accumulated foreign currency translation was transferred from accumulated other comprehensive income to earnings. Refer to Note 16, "Disposals" for more information on disposals. During the three months ended September 30, 2019, the Company recorded a loss on the sale of the EC Remedy of $9 million, which is the result of the reclassification of accumulated foreign currency translation amounts from accumulated other comprehensive income to earnings. Refer to Note 3, "Discontinued Operations" for more information on the sale of the EC Remedy.
Note 13 - Segments
The Company's business is organized and presented in the two reportable segments outlined below:
Flexibles: Consists of operations that manufacture flexible and film packaging in the food and beverage, medical and pharmaceutical, fresh produce, snack food, personal care, and other industries.
Rigid Packaging: Consists of operations that manufacture rigid containers for a broad range of predominantly beverage and food products, including carbonated soft drinks, water, juices, sports drinks, milk-based beverages, spirits and beer, sauces, dressings, spreads and personal care items and plastic caps for a wide variety of applications.
Other consists of the Company's undistributed corporate expenses including executive and functional compensation costs, equity method investments, intercompany eliminations and other business activities.
The accounting policies of the reportable segments are the same as those in the consolidated financial statements. During the first quarter of fiscal 2021, the Company has revised the presentation of adjusted earnings before interest and tax ("Adjusted EBIT") from continuing operations in the reportable segments to include an allocation of certain research and development and selling, general and administrative expenses that management previously reflected in Other. The Company refines its expense allocation methodologies to the reportable segments periodically as more refined information becomes available and to align with industry or market changes. Corporate expenses are allocated to the reportable segments based primarily on direct attribution. Prior periods have been recast to conform to the new cost allocation methodology.
The following table presents information about reportable segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
($ in millions)
|
|
2020
|
|
2019
|
|
|
|
|
Sales including intersegment sales
|
|
|
|
|
|
|
|
|
Flexibles
|
|
$
|
2,400
|
|
|
$
|
2,431
|
|
|
|
|
|
Rigid Packaging
|
|
698
|
|
|
711
|
|
|
|
|
|
Other
|
|
—
|
|
|
—
|
|
|
|
|
|
Total sales including intersegment sales
|
|
3,098
|
|
|
3,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment sales
|
|
|
|
|
|
|
|
|
Flexibles
|
|
1
|
|
|
1
|
|
|
|
|
|
Rigid Packaging
|
|
—
|
|
|
—
|
|
|
|
|
|
Other
|
|
—
|
|
|
—
|
|
|
|
|
|
Total intersegment sales
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
3,097
|
|
|
$
|
3,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBIT from continuing operations
|
|
|
|
|
|
|
|
|
Flexibles
|
|
$
|
312
|
|
|
$
|
283
|
|
|
|
|
|
Rigid Packaging
|
|
72
|
|
|
69
|
|
|
|
|
|
Other
|
|
(27)
|
|
|
(17)
|
|
|
|
|
|
Adjusted EBIT from continuing operations
|
|
358
|
|
|
335
|
|
|
|
|
|
Less: Material restructuring programs (1)
|
|
(14)
|
|
|
(17)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Material acquisition costs and other (2)
|
|
(9)
|
|
|
(84)
|
|
|
|
|
|
Less: Amortization of acquired intangible assets from business combinations (3)
|
|
(41)
|
|
|
(68)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Impact of hyperinflation (4)
|
|
(4)
|
|
|
(15)
|
|
|
|
|
|
Add: Net gain on disposals (5)
|
|
9
|
|
|
—
|
|
|
|
|
|
EBIT from continuing operations
|
|
298
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
3
|
|
|
7
|
|
|
|
|
|
Interest expense
|
|
(40)
|
|
|
(60)
|
|
|
|
|
|
Equity in (income) loss of affiliated companies, net of tax
|
|
(19)
|
|
|
(2)
|
|
|
|
|
|
Income from continuing operations before income taxes and equity in income (loss) of affiliated companies
|
|
$
|
242
|
|
|
$
|
96
|
|
|
|
|
|
(1)Material restructuring programs includes the 2018 Rigid Packaging Restructuring Plan and the 2019 Bemis Integration Plan for the three months ended September 30, 2020 and 2019. Refer to Note 4, "Restructuring Plans," for more information about the Company's restructuring plans.
(2)Material acquisition costs and other includes Bemis transaction related costs and integration costs not qualifying as exit costs for the three months ended September 30, 2020. Material acquisition costs and other includes $58 million amortization of Bemis acquisition related inventory fair value step-up and $26 million of Bemis transaction related costs and integration costs not qualifying as exit costs for the three months ended September 30, 2019.
(3)Amortization of acquired intangible assets from business combinations includes amortization expenses related to all acquired intangible assets from acquisitions impacting the periods presented, including $26 million of sales backlog amortization for the three months ended September 30, 2019 from the Bemis acquisition.
(4)Impact of hyperinflation includes the adverse impact of highly inflationary accounting for subsidiaries in Argentina where the functional currency was the Argentine Peso.
(5)Net gain on disposals includes the gain realized upon the disposal of AMVIG and other non-core businesses. Refer to Note 16, "Disposals" for more information about the Company's disposals.
The following tables disaggregates sales, excluding intersegment sales, information by geography in which the Company operates based on manufacturing or selling operation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
Three Months Ended September 30,
|
|
|
2020
|
|
2019
|
($ in millions)
|
|
Flexibles
|
|
Rigid Packaging
|
|
Total
|
|
Flexibles
|
|
Rigid Packaging
|
|
Total
|
North America
|
|
$
|
900
|
|
|
$
|
587
|
|
|
$
|
1,486
|
|
|
$
|
908
|
|
|
$
|
585
|
|
|
$
|
1,493
|
|
Latin America
|
|
227
|
|
|
111
|
|
|
338
|
|
|
263
|
|
|
126
|
|
|
389
|
|
Europe
|
|
894
|
|
|
—
|
|
|
894
|
|
|
886
|
|
|
—
|
|
|
886
|
|
Asia Pacific
|
|
378
|
|
|
—
|
|
|
378
|
|
|
374
|
|
|
—
|
|
|
374
|
|
Net sales
|
|
$
|
2,399
|
|
|
$
|
698
|
|
|
$
|
3,097
|
|
|
$
|
2,430
|
|
|
$
|
711
|
|
|
$
|
3,141
|
|
Note 14 - Earnings Per Share Computations
The Company applies the two-class method when computing its earnings per share ("EPS"), which requires that net income per share for each class of share be calculated assuming all of the Company's net income is distributed as dividends to each class of share based on their contractual rights.
Basic EPS is computed by dividing net income available to ordinary shareholders by the weighted-average number of ordinary shares outstanding after excluding the ordinary shares to be repurchased using forward contracts. Diluted EPS includes the effects of share options, restricted shares, performance rights, performance shares and share rights, if dilutive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
(in millions, except per share amounts)
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Amcor plc
|
|
$
|
198
|
|
|
$
|
66
|
|
|
|
|
|
|
|
|
|
Distributed and undistributed earnings attributable to shares to be repurchased
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Net income available to ordinary shareholders of Amcor plc—basic and diluted
|
|
$
|
198
|
|
|
$
|
66
|
|
|
|
|
|
|
|
|
|
Net income available to ordinary shareholders of Amcor plc from continuing operations—basic and diluted
|
|
$
|
198
|
|
|
$
|
74
|
|
|
|
|
|
|
|
|
|
Net income available to ordinary shareholders of Amcor plc from discontinued operations—basic and diluted
|
|
$
|
—
|
|
|
$
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average ordinary shares outstanding
|
|
1,562.5
|
|
|
1,623.5
|
|
|
|
|
|
|
|
|
|
Weighted-average ordinary shares to be repurchased by Amcor plc
|
|
(2.0)
|
|
|
(0.3)
|
|
|
|
|
|
|
|
|
|
Weighted-average ordinary shares outstanding for EPS—basic
|
|
1,560.5
|
|
|
1,623.2
|
|
|
|
|
|
|
|
|
|
Effect of dilutive shares
|
|
4.8
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
Weighted-average ordinary shares outstanding for EPS—diluted
|
|
1,565.3
|
|
|
1,626.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per ordinary share income
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.127
|
|
|
$
|
0.045
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
—
|
|
|
(0.005)
|
|
|
|
|
|
|
|
|
|
Basic earnings per ordinary share
|
|
$
|
0.127
|
|
|
$
|
0.041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.126
|
|
|
$
|
0.045
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
—
|
|
|
(0.005)
|
|
|
|
|
|
|
|
|
|
Diluted earnings per ordinary share
|
|
$
|
0.126
|
|
|
$
|
0.041
|
|
|
|
|
|
|
|
|
|
Note: Per share amounts are computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in average quarterly shares outstanding and all other quarterly amounts may not equal the total year due to rounding.
Certain outstanding share options were excluded from the diluted earnings per share calculation because they were anti-dilutive. The excluded share options for the three months ended September 30, 2020 and 2019 represented an aggregate of 22.8 million and 17.3 million shares, respectively.
Note 15 - Contingencies and Legal Proceedings
Contingencies - Brazil
The Company's operations in Brazil are involved in various governmental assessments and litigation, principally related to claims for excise and income taxes. The Company will vigorously defend its positions and believes it will prevail on most, if not all, of these matters. The Company does not believe that the ultimate resolution of these matters will materially impact the Company's consolidated results of operations, financial position or cash flows. Under customary local regulations, the Company's Brazilian subsidiaries may need to post cash or other collateral if a challenge to any administrative assessment proceeds to the Brazilian court system; however, the level of cash or collateral already pledged or potentially required to be pledged would not significantly impact the Company's liquidity. At both September 30, 2020 and June 30, 2020, the Company has recorded an accrual of $12 million, included in other non-current liabilities in the unaudited condensed consolidated balance sheet, and has estimated a reasonably possible loss exposure in excess of the accrual of $18 million. The litigation process is subject to many uncertainties and the outcome of individual matters cannot be accurately predicted. The Company routinely assesses these matters as to probability of ultimately incurring a liability and records the best estimate of the ultimate loss in situations where the likelihood of an ultimate loss is probable. The Company's assessments are based on its knowledge and experience, but the ultimate outcome of any of these matters may differ from the Company's estimates.
As of September 30, 2020, Amcor has provided letters of credit of $33 million, judicial insurance of $1 million, and deposited cash of $10 million with the courts to continue to defend the cases.
Contingencies - Environmental Matters
The Company, along with others, has been identified as a potentially responsible party ("PRP") at several waste disposal sites under U.S. federal and related state environmental statutes and regulations and may face potentially material environmental remediation obligations. While the Company benefits from various forms of insurance policies, actual coverage may not, or only partially, cover the total potential exposures. The Company has recorded $17 million aggregate accruals for its share of estimated future remediation costs at these sites.
In addition to the matters described above, the Company has also recorded aggregate accruals of $46 million for potential liabilities for remediation obligations at various worldwide locations that are owned or operated by the Company, or were formerly owned or operated.
While the Company believes that its accruals are adequate to cover its future obligations, there can be no assurance that the ultimate payments will not exceed the accrued amounts. Nevertheless, based on the available information, the Company does not believe that its potential environmental obligations will have a material adverse effect upon its liquidity, results of operations or financial condition.
Legal Proceedings
Two lawsuits brought by purported holders of Bemis stock against Bemis and Bemis directors and officers are pending in federal court in the U.S. District Court for the Southern District of New York, in which plaintiffs are seeking damages for alleged violations of the Securities Exchange Act of 1934, as amended, and U.S. Securities and Exchange Commission rules and regulations. Plaintiffs allege a failure to adequately disclose information in the proxy statement issued in connection with the Amcor-Bemis merger. The cases are: Dixon, et al. v. Bemis Company, Inc. et al. and Stein v. Bemis Company, Inc. et al., which were instituted on April 15, 2019 and April 17, 2019, respectively. On March 10, 2020 the federal court in the U.S. District Court for the Southern District of New York consolidated the two pending cases into a single class action.
In addition, a purported holder of Bemis stock filed a putative derivative suit in the Cole County Circuit Court, Nineteenth Judicial District of Missouri, against Bemis directors and Amcor, alleging that the directors breached fiduciary duties in connection with the Amcor-Bemis merger and that Amcor aided and abetted breaches of fiduciary duty. The case is Scarantino, et al. v. Amcor Limited, et al., which was instituted on April 19, 2019.
The Company intends to defend the claims made in the pending actions. It is too early for the Company to provide any reliable assessment of the likely quantum of any damages that may become payable if its defense is unsuccessful in whole or in part. Although it is not possible at present to establish a reliable assessment of damages, there can be no assurance that any damages that may be awarded will not be material to the results of operations or financial condition of the Company.
Note 16 - Disposals
During the three months ended September 30, 2020, the Company disposed of an equity method investment and other non-core businesses. The Company completed the sale of the equity method investment in AMVIG on September 30, 2020, realizing a net gain of $15 million, which was recorded in the line equity in income (loss) of affiliated companies, net of tax. The Company also completed the disposal of two non-core businesses in India and Argentina in the Flexibles segment during the first quarter of fiscal 2021, recording a loss on sale of $6 million, which was primarily driven by the reclassification of cumulative translation adjustments that had previously been recorded in other comprehensive income.
Note 17 - Subsequent Events
On November 5, 2020, the Company's Board of Directors declared a quarterly cash dividend of $0.1175 per share to be paid on December 15, 2020 to shareholders of record as of November 24, 2020. Amcor has received a waiver from the Australian Securities Exchange ("ASX") settlement operating rules, which will allow Amcor to defer processing conversions between ordinary share and CHESS Depositary Instrument ("CDI") registers from November 23, 2020 to November 24, 2020, inclusive.
On November 5, 2020, the Company's Board of Directors approved a $150 million buyback of ordinary shares and Chess Depositary Instruments ("CDIs"). Pursuant to this program, purchases of the Company's ordinary shares and CDIs will be made subject to market conditions and at prevailing market prices, through open market purchases. The Company expects to complete the share buyback by the end of fiscal year 2021; however, the timing, volume and nature of repurchases may be amended, suspended or discontinued at any time.