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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
amcr-20220930_g1.jpg
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2022

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 001-38932

AMCOR PLC
(Exact name of Registrant as specified in its charter)
Jersey
 
98-1455367
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

83 Tower Road North
Warmley, Bristol BS30 8XP
United Kingdom
(Address of principal executive offices)

Registrant’s telephone number, including area code: +44 117 9753200

    Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Ordinary Shares, Par Value $0.01 Per Share AMCRNew York Stock Exchange
1.125% Guaranteed Senior Notes Due 2027AUKF/27New York Stock Exchange

    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  No

    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No
1




    Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated FilerEmerging Growth Company
Non-Accelerated FilerSmaller Reporting Company
Accelerated Filer

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
    As of October 31, 2022, the registrant had 1,489,019,556 ordinary shares, $0.01 par value, outstanding.

2



Amcor plc
Quarterly Report on Form 10-Q
Table of Contents
  
 
 
 
3





Cautionary Statement Regarding Forward-Looking Statements

    Unless otherwise indicated, references to "Amcor," the "Company," "we," "our," and "us" in this Quarterly Report on Form 10-Q refer to Amcor plc and its consolidated subsidiaries.

    This Quarterly Report on Form 10-Q contains certain statements that are "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identified with words like "believe," "expect," "target," "project," "may," "could," "would," "approximately," "possible," "will," "should," "intend," "plan," "anticipate," "commit," "estimate," "potential," "ambitions," "outlook," or "continue," the negative of these words, other terms of similar meaning, or the use of future dates. Such statements are based on the current expectations of the management of Amcor and are qualified by the inherent risks and uncertainties surrounding future expectations generally. Actual results could differ materially from those currently anticipated due to a number of risks and uncertainties. None of Amcor or any of its respective directors, executive officers, or advisors, provide any representation, assurance, or guarantee that the occurrence of the events expressed or implied in any forward-looking statements will actually occur. Risks and uncertainties that could cause actual results to differ from expectations include, but are not limited to:

• Changes in consumer demand patterns and customer requirements in numerous industries;
• the loss of key customers, a reduction in their production requirements, or consolidation among key customers;
• significant competition in the industries and regions in which we operate;
• the inability to expand our current business effectively through either organic growth, including by product innovation, or acquisitions;
• challenging current and future global economic conditions, including inflation and supply chain disruptions;
• impact of operating internationally, including negative impacts from the Russia-Ukraine conflict;
• price fluctuations or shortages in the availability of raw materials, energy and other inputs, which could adversely affect our business;
• production, supply, and other commercial risks, including counterparty credit risks, which may be exacerbated in times of economic volatility;
• global health outbreaks, including the Coronavirus pandemic ("COVID-19");
• an inability to attract and retain key personnel;
• costs and liabilities related to current and future environment, health and safety laws and regulations;
• labor disputes;
• risks related to climate change;
• failures or disruptions in information technology systems;
• cybersecurity risks, which could disrupt our operations or risk of loss of our sensitive business information;
• a significant increase in our indebtedness or a downgrade in our credit rating could reduce our operating flexibility and increase our borrowing costs and negatively affect our financial condition and results of operations;
• foreign exchange rate risk;
• rising interest rates that increase our borrowing costs on our variable rate indebtedness and could have other negative impacts;
• a significant write-down of goodwill and/or other intangible assets;
• failure to maintain an effective system of internal control over financial reporting;
• an inability of our insurance policies, including our use of a captive insurance company, to provide adequate protection against all of the risks we face;
• an inability to defend our intellectual property rights or intellectual property infringement claims against us;
• litigation, including product liability claims, or regulatory developments;
• increasing scrutiny and changing expectations with respect to our Environmental, Social, and Governance ("ESG") practices resulting in additional costs or exposure to additional risks;
• changing government regulations in environmental, health, and safety matters; and
• changes in tax laws or changes in our geographic mix of earnings.

    These risks and uncertainties are supplemented by those identified from time to time in our filings with the Securities and Exchange Commission, including without limitation, those described under Part I, "Item 1A - Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, as updated by our quarterly reports on Form 10-Q. You can obtain copies of Amcor’s filings with the SEC for free at the SEC’s website (www.sec.gov). Forward-looking statements included herein are made only as of the date hereof and Amcor does not undertake any obligation to update any forward-looking statements, or any other information in this communication, as a result of new information, future developments or otherwise, or to correct any inaccuracies or omissions in them which become apparent, except as expressly required by law. All forward-looking statements in this communication are qualified in their entirety by this cautionary statement.
4



Part I - Financial Information
Item 1. Financial Statements (unaudited)
Amcor plc and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended September 30,
($ in millions, except per share data)20222021
Net sales$3,712 $3,420 
Cost of sales(3,044)(2,770)
Gross profit668 650 
Operating expenses:
Selling, general, and administrative expenses(302)(313)
Research and development expenses(25)(25)
Restructuring and related expenses, net(1)(8)
Other income/(expenses), net2 (8)
Operating income342 296 
Interest income9 5 
Interest expense(59)(40)
Other non-operating income, net 5 
Income before income taxes292 266 
Income tax expense(58)(63)
Net income$234 $203 
Net income attributable to non-controlling interests(2)(1)
Net income attributable to Amcor plc$232 $202 
Basic earnings per share:$0.156 $0.131 
Diluted earnings per share:$0.155 $0.131 
See accompanying notes to condensed consolidated financial statements.
5




Amcor plc and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended September 30,
($ in millions)20222021
Net income$234 $203 
Other comprehensive loss:
Net losses on cash flow hedges, net of tax (a)(7)(2)
Foreign currency translation adjustments, net of tax (b)
(161)(95)
Other comprehensive loss(168)(97)
Total comprehensive income66 106 
Comprehensive income attributable to non-controlling interests(2) 
Comprehensive income attributable to Amcor plc$64 $106 
(a) Tax benefit related to cash flow hedges$1 $ 
(b) Tax expense related to foreign currency translation adjustments$(3)$(2)
See accompanying notes to condensed consolidated financial statements.

6



Amcor plc and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

($ in millions, except share and per share data)September 30, 2022June 30, 2022
Assets
Current assets:
Cash and cash equivalents$562 $775 
Trade receivables, net of allowance for doubtful accounts of $23 and $25, respectively
1,984 1,935 
Inventories, net:
Raw materials and supplies1,216 1,114 
Work in process and finished goods1,374 1,325 
Prepaid expenses and other current assets549 512 
Assets held for sale, net164 192 
Total current assets5,849 5,853 
Non-current assets:
Property, plant, and equipment, net3,589 3,646 
Operating lease assets536 560 
Deferred tax assets129 130 
Other intangible assets, net1,609 1,657 
Goodwill5,237 5,285 
Employee benefit assets85 89 
Other non-current assets258 206 
Total non-current assets11,443 11,573 
Total assets$17,292 $17,426 
Liabilities
Current liabilities:
Current portion of long-term debt$14 $14 
Short-term debt62 136 
Trade payables2,839 3,073 
Accrued employee costs373 471 
Other current liabilities1,264 1,344 
Liabilities held for sale37 65 
Total current liabilities4,589 5,103 
Non-current liabilities:
Long-term debt, less current portion6,879 6,340 
Operating lease liabilities470 493 
Deferred tax liabilities663 677 
Employee benefit obligations192 201 
Other non-current liabilities523 471 
Total non-current liabilities8,727 8,182 
Total liabilities13,316 13,285 
Commitments and contingencies (See Note 14)
Shareholders' Equity
Amcor plc shareholders’ equity:
Ordinary shares ($0.01 par value)
Authorized (9,000 million shares)
Issued (1,489 and 1,489 million shares, respectively)
$15 $15 
Additional paid-in capital4,412 4,431 
Retained earnings588 534 
Accumulated other comprehensive loss(1,048)(880)
Treasury shares (4 and 2 million shares, respectively)
(49)(18)
Total Amcor plc shareholders' equity3,918 4,082 
Non-controlling interests58 59 
Total shareholders' equity3,976 4,141 
Total liabilities and shareholders' equity$17,292 $17,426 
See accompanying notes to condensed consolidated financial statements.
7



Amcor plc and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended September 30,
($ in millions)20222021
Cash flows from operating activities:  
Net income$234 $203 
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation, amortization, and impairment151 177 
Net periodic benefit cost2 1 
Amortization of debt discount and deferred financing costs1 1 
Net foreign exchange gain(17)(11)
Share-based compensation16 15 
Other, net56 73 
Loss from hyperinflationary accounting for Argentine subsidiaries13 2 
Deferred income taxes, net(16)(11)
Changes in operating assets and liabilities, excluding effect of acquisitions, divestitures, and currency(700)(562)
Net cash used in operating activities(260)(112)
Cash flows from investing activities:
Investments in affiliated companies and other(42) 
Business acquisitions(54) 
Purchase of property, plant, and equipment, and other intangible assets(152)(145)
Proceeds from divestitures4  
Proceeds from sales of property, plant, and equipment, and other intangible assets4  
Net cash used in investing activities(240)(145)
Cash flows from financing activities:
Proceeds from issuance of shares96 82 
Purchase of treasury shares(202)(131)
Proceeds from issuance of long-term debt1 8 
Repayment of long-term debt(24)(401)
Net borrowing of commercial paper703 795 
Net repayment of short-term debt(66)(38)
Repayment of lease liabilities(1)(1)
Share buyback/cancellations (64)
Dividends paid(181)(183)
Net cash provided by financing activities326 67 
Effect of exchange rates on cash and cash equivalents(60)(27)
Change in cash and cash equivalents classified as held for sale21  
Net decrease in cash and cash equivalents(213)(217)
Cash and cash equivalents balance at beginning of year775 850 
Cash and cash equivalents balance at end of period$562 $633 
Supplemental cash flow information:
Interest paid, net of amounts capitalized$40 $16 
Income taxes paid$35 $55 
Supplemental non-cash disclosures relating to investing and financing activities:
Purchase of property and equipment, accrued but unpaid$77 $52 
See accompanying notes to condensed consolidated financial statements.
8



Amcor plc and Subsidiaries
Condensed Consolidated Statements of Equity
(Unaudited)
($ in millions, except per share data)Ordinary SharesAdditional Paid-In CapitalRetained
Earnings
Accumulated Other Comprehensive LossTreasury SharesNon-controlling InterestTotal
Balance as of June 30, 2021$15 $5,092 $452 $(766)$(29)$57 $4,821 
Net income202 1 203 
Other comprehensive loss(96)(1)(97)
Share buyback/cancellations (64)(64)
Dividends declared ($0.1175 per share)
(181)(2)(183)
Options exercised and shares vested(28)110 82 
Net settlement of forward contracts to purchase own equity for share-based incentive plans, net of tax59 59 
Purchase of treasury shares(131)(131)
Share-based compensation expense15 15 
Balance as of September 30, 2021$15 $5,074 $473 $(862)$(50)$55 $4,705 
Balance as of June 30, 2022$15 $4,431 $534 $(880)$(18)$59 $4,141 
Net income232 2 234 
Other comprehensive loss(168) (168)
Dividends declared ($0.12 per share)
(178)(3)(181)
Options exercised and shares vested(75)171 96 
Net settlement of forward contracts to purchase own equity for share-based incentive plans, net of tax40 40 
Purchase of treasury shares(202)(202)
Share-based compensation expense16 16 
Balance as of September 30, 2022$15 $4,412 $588 $(1,048)$(49)$58 $3,976 
See accompanying notes to condensed consolidated financial statements.

9



Amcor plc and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1 - Nature of Operations and Basis of Presentation

    Amcor plc ("Amcor" or the "Company") is a public limited company incorporated under the Laws of the Bailiwick of Jersey. The Company's history dates back more than 150 years, with origins in both Australia and the United States of America. Today, Amcor is a global leader in developing and producing responsible packaging for food, beverage, pharmaceutical, medical, home and personal-care, and other consumer goods end markets. The Company's innovation excellence and global packaging expertise enables the Company to solve packaging challenges around the world every day, producing packaging that is more functional, appealing, and cost effective for its customers and their consumers and importantly, more sustainable for the environment.

    The accompanying unaudited condensed 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. Further, the year-end condensed consolidated balance sheet data as of June 30, 2022 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. It is management's opinion, however, that all material and recurring adjustments have been made that are necessary for a fair statement of its interim financial position, results of operations, and cash flows. For further information, this Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

    There have been no material changes to the accounting policies followed by the Company during the current fiscal year. The Company reclassified prior year comparative figures in the condensed consolidated balance sheets 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 unaudited condensed consolidated financial statements may not add or recalculate due to rounding.

10




Note 2 - New Accounting Guidance

Recently Adopted Accounting Standards

    In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-10, Government Assistance (Topic 832) that adds certain disclosure requirements for entities that receive government assistance. The standard is effective for annual periods beginning after December 15, 2021 with early adoption permitted. The Company adopted ASU 2021-10 on July 1, 2022, and the adoption did not have a material impact on the Company's condensed consolidated financial statements. ASU 2021-10 may have a material impact on the Company’s disclosures in the future, if government assistance provided to the Company were to become material.

Accounting Standards Not Yet Adopted

    In September 2022, the FASB issued Accounting Standards Update ("ASU") 2022-04 that adds certain disclosure requirements for entities that use supplier finance programs in connection with the purchase of goods and services. The new standard's requirement to disclose the key terms of supplier finance programs is effective for all interim and annual periods beginning with the Company's fiscal year ending June 30, 2024. The new standard does not affect the recognition, measurement, or financial statement presentation of supplier finance program obligations. Early adoption is permitted. The Company is currently evaluating the impact that this new guidance may have on its consolidated financial statements.

    The Company considers the applicability and impact of all ASUs issued by the FASB. The Company determined at this time that all other ASUs not yet adopted are either not applicable or are expected to have a minimal impact on its results of operation, financial position, and disclosures.
11



Note 3 - Held for Sale

    During the fourth quarter of fiscal year 2022, the Company classified the assets and liabilities of its Russian operations as held for sale as a result of the Company's decision to sell its three manufacturing facilities in Russia ("Russian business"), and recorded an impairment of $90 million. In the first quarter of fiscal year 2023, the Company has obtained indicative bids on which basis the expected fair value less costs to sell the Russian business has been updated, which did not result in a change to the previously recognized impairment. The Russian business is part of the Company’s Flexibles segment and is expected to be sold within fiscal year 2023. The disposal of the Russian business will not represent a strategic shift that will have a major effect on the Company's operations and financial results, and therefore does not qualify for reporting as a discontinued operation.

    Major classes of assets and liabilities of the Russian business classified as held for sale were as follows:
($ in millions)September 30, 2022June 30, 2022
Cash and cash equivalents$49 $75 
Trade receivables, net79 66 
Inventories, net37 40 
Prepaid expenses and other current assets26 36 
Property, plant, and equipment, net47 49 
Goodwill16 16 
Total assets held for sale254 282 
Less accumulated impairment (1) (90)(90)
Total assets held for sale, net$164 $192 
Trade payables37 65 
Total current liabilities held for sale$37 $65 
(1) Inclusive of accumulated other comprehensive loss related to the Russian business.

    This table excludes other non-material assets and liabilities that are held for sale but not part of the Russian business.
12



Note 4 - Acquisitions

    On August 1, 2022, the Company completed the acquisition of 100% equity interest in DGPack s.r.o., a Czech Republic company that operates a world-class flexible packaging manufacturing plant. The initial purchase consideration amounted to $60 million and is subject to customary post-closing adjustments. The consideration includes $6 million that will be paid in the second quarter of fiscal year 2023. The acquisition is part of the Company's Flexibles reportable segment and resulted in the recognition of acquired identifiable net assets of $39 million and goodwill of $21 million. Goodwill is not deductible for tax purposes. The fair values of the identifiable net assets acquired and goodwill are based on the Company's best estimate as of September 30, 2022 and are considered preliminary. The fair value estimates were based on income, market, and cost valuation methods. The Company aims to complete the purchase price allocation as soon as practicable but no later than one year from the date of the acquisition.

    Pro forma information related to the acquisition of DGPack s.r.o. has not been presented, as the effect of the acquisition on the Company's consolidated financial statements was not material.


13



Note 5 - Restructuring

    The Company's restructuring activities in the three months ended September 30, 2022 were primarily comprised of restructuring activities related to the Russia-Ukraine conflict.

    Restructuring and related expenses, net were $1 million and $8 million during the three months ended September 30, 2022 and 2021, respectively, and primarily relate to the Flexibles reporting segment. The expenses related to restructuring activities have been presented on the unaudited condensed consolidated statements of income as restructuring and related expenses, net.

    An analysis of the Company's restructuring plan liability is as follows:
($ in millions)Employee CostsFixed Asset Related CostsOther CostsTotal Restructuring Costs
Liability balance at June 30, 2022$97 $3 $18 $118 
Cash paid(7)(1)(1)(9)
Reversal of unused amounts(2)  (2)
Foreign currency translation(5) (1)(6)
Liability balance at September 30, 2022$83 $2 $16 $101 

    The Company expects the majority of the liability for employee, fixed asset related, and other costs as of September 30, 2022 to be paid by the end of fiscal year 2023. The accruals related to restructuring activities have been recorded on the unaudited condensed consolidated balance sheets under other current liabilities and other non-current liabilities.



14



Note 6 - Goodwill and Other Intangible Assets, Net

Goodwill

    Changes in the carrying amount of goodwill, excluding amounts classified as held for sale, attributable to each reportable segment were as follows:

($ in millions)Flexibles SegmentRigid Packaging SegmentTotal
Balance as of June 30, 2022$4,307 $978 $5,285 
Acquisitions21  21 
Foreign currency translation(62)(7)(69)
Balance as of September 30, 2022$4,266 $971 $5,237 

    Goodwill is not amortized but is tested for impairment annually in the fourth quarter of the fiscal year, or during interim periods if events or circumstances arise which indicate that goodwill may be impaired.

Other Intangible Assets, Net

    Other intangible assets, net comprised the following:

 September 30, 2022
($ in millions)Gross Carrying AmountAccumulated Amortization and Impairment (1)Net Carrying Amount
Customer relationships$1,960 $(556)$1,404 
Computer software231 (160)71 
Other (2)319 (185)134 
Total other intangible assets$2,510 $(901)$1,609 

 June 30, 2022
($ in millions)Gross Carrying AmountAccumulated Amortization and Impairment (1)Net Carrying Amount
Customer relationships$1,970 $(529)$1,441 
Computer software235 (162)73 
Other (2)323 (180)143 
Total other intangible assets$2,528 $(871)$1,657 
(1)Accumulated amortization and impairment included $32 million and $33 million for September 30, 2022 and June 30, 2022, respectively, of accumulated impairment in the Other category.
(2)Other included $16 million for September 30, 2022 and June 30, 2022, respectively, of acquired intellectual property assets not yet being amortized as the related R&D projects have not yet been completed.

    Amortization expenses for intangible assets were $43 million and $45 million during the three months ended September 30, 2022 and 2021, respectively.
15



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. As of September 30, 2022 and June 30, 2022, the carrying value of these financial instruments, excluding long-term debt, approximated fair value because of the short-term nature of these instruments.

    The carrying value of long-term debt with variable interest rates approximates its fair 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 value and estimated fair value of long-term debt with fixed interest rates (including fixed-rate debt with designated receive-fixed/pay-variable interest rate swaps) were as follows:

 September 30, 2022June 30, 2022
 Carrying ValueFair ValueCarrying ValueFair Value
($ in millions)(Level 2)(Level 2)
Total long-term debt with fixed interest rates (excluding commercial paper and finance leases)$3,867 $3,517 $3,952 $3,694 

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:

 September 30, 2022
($ in millions)Level 1Level 2Level 3Total
Assets
Commodity contracts$ $1 $ $1 
Forward exchange contracts 7  7 
Total assets measured at fair value$ $8 $ $8 
Liabilities
Contingent purchase consideration liabilities$ $ $16 $16 
Commodity contracts 3  3 
Forward exchange contracts 21  21 
Interest rate swaps 102  102 
Total liabilities measured at fair value$ $126 $16 $142 

16



 June 30, 2022
($ in millions)Level 1Level 2Level 3Total
Assets
Commodity contracts$ $6 $ $6 
Forward exchange contracts 7  7 
Total assets measured at fair value$ $13 $ $13 
Liabilities
Contingent purchase consideration liabilities$ $ $16 $16 
Commodity contracts 3  3 
Forward exchange contracts 17  17 
Interest rate swaps 69  69 
Total liabilities measured at fair value$ $89 $16 $105 

    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 purchase consideration liabilities arise from business acquisitions. As of September 30, 2022, the Company's contingent purchase consideration liabilities consist of a $10 million liability that is contingent on future royalty income generated by Discma AG, a subsidiary acquired in March 2017, and a $6 million balance relating to consideration for small business acquisitions where payments are contingent on the Company vacating a certain property or performance criteria. 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 forecasts 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 sheets.

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. These nonrecurring fair value measurements are considered to be Level 3 in the fair value hierarchy.

    As further discussed in Note 3 -"Held for Sale," during the fourth quarter of fiscal year 2022, the Company met the criteria to recognize the Russian business as held for sale which resulted in the Company remeasuring the disposal group at its fair value, less cost to sell, which is considered a Level 3 fair value measurement. In the first quarter of fiscal year 2023, the Company has obtained indicative bids on which basis the expected fair value less costs to sell the Russian business has been updated, which did not result in a change to the previously recognized impairment.

    During the three months ended September 30, 2021, long-lived assets with a carrying value of $12 million were written down to a fair value of zero as the Company's Durban, South Africa, manufacturing facility was destroyed in a fire as the result of general civil unrest. In addition, other long-lived assets in South Africa, with a carrying amount of $8 million, were written down to their estimated fair value of $4 million using level 3 inputs. These expenses are included within other income/(expenses), net in the accompanying unaudited condensed consolidated statements of income.

    The Company tests indefinite-lived intangibles, including goodwill, for impairment when facts and circumstances indicate the carrying value may not be recoverable. These nonrecurring fair value measurements are considered to be Level 3 in the fair value hierarchy. During the three months ended September 30, 2022, and 2021, there were no indefinite-lived intangible impairment charges recorded.
17



Note 8 - Derivative Instruments

    The Company periodically uses derivatives and other financial instruments to hedge exposures to interest rate, commodity price, and currency risks. The Company does not hold or issue derivative instruments for speculative or trading purposes. For hedges that meet the hedge accounting criteria, the Company, at inception, formally designates and documents the instruments 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, the gains and losses related to the changes in the fair value of the interest rate swaps are included in interest expense and offset changes in the fair value of the hedged portion of the underlying debt that are attributable to the changes in market interest rates. 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 statements of income in other non-operating income, net.

    As of September 30, 2022, and June 30, 2022, the total notional amount of the Company’s receive-fixed/pay-variable interest rate swaps accounted for as fair value hedges was $650 million.

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 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 consolidated statements 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 statements of income.

    As of September 30, 2022, and June 30, 2022, the notional amount of the outstanding forward contracts was $0.9 billion and $1.0 billion, respectively.
    
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 central treasury units. 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 statements of income when the forecasted transaction is realized.

    The Company had the following outstanding commodity contracts to hedge forecasted purchases:
 September 30, 2022June 30, 2022
CommodityVolumeVolume
Aluminum20,873 tons17,040 tons
PET resin11,857,680 lbs.16,886,520 lbs.
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    The following table provides the location of derivative instruments in the unaudited condensed consolidated balance sheets:

($ in millions)Balance Sheet LocationSeptember 30, 2022June 30, 2022
Assets
Derivatives in cash flow hedging relationships:
Commodity contractsOther current assets$1 $6 
Forward exchange contractsOther current assets4 3 
Forward exchange contractsAssets held for sale, net2 3 
Derivatives not designated as hedging instruments:
Forward exchange contractsOther current assets1 1 
Total current derivative contracts8 13 
Total non-current derivative contracts  
Total derivative asset contracts$8 $13 
Liabilities
Derivatives in cash flow hedging relationships:
Commodity contractsOther current liabilities$3 $3 
Forward exchange contractsOther current liabilities8 5 
Derivatives not designated as hedging instruments:
Forward exchange contractsOther current liabilities11 11 
Total current derivative contracts22 19 
Derivatives in cash flow hedging relationships:
Forward exchange contractsOther non-current liabilities2 1 
Derivatives in fair value hedging relationships:
Interest rate swapsOther non-current liabilities102 69 
Total non-current derivative contracts104 70 
Total derivative liability contracts$126 $89 

    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 sheets.

    The following tables provide the effects of derivative instruments on AOCI and in the unaudited condensed consolidated statements 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)20222021
Derivatives in cash flow hedging relationships
Commodity contractsCost of sales$2 $6 
Treasury locksInterest expense(1)(1)
Total$1 $5 

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Location of Loss Recognized in the Unaudited Condensed Consolidated Statements of IncomeLoss Recognized in Income for Derivatives Not Designated as Hedging Instruments
Three Months Ended September 30,
($ in millions)20222021
Derivatives not designated as hedging instruments
Forward exchange contractsOther income/(expenses), net$(15)$(13)
Total$(15)$(13)

Location of Loss Recognized in the Unaudited Condensed Consolidated Statements of IncomeLoss Recognized in Income for Derivatives in Fair Value Hedging Relationships
Three Months Ended September 30,
($ in millions)20222021
Derivatives in fair value hedging relationships
Interest rate swapsInterest expense$(33)$(4)
Total$(33)$(4)

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Note 9 - Components of Net Periodic Benefit Cost

    Net periodic benefit cost for benefit plans included the following components:

Three Months Ended September 30,
($ in millions)20222021
Service cost$4 $6 
Interest cost12 11 
Expected return on plan assets(14)(16)
Amortization of actuarial loss1 1 
Amortization of prior service credit(1)(1)
Net periodic benefit cost$2 $1 

    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, net.

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Note 10 - Income Taxes

    The provision for income taxes for the three months ended September 30, 2022 and 2021 is based on the Company’s estimated annual effective tax rate for the respective fiscal years, and is applied on income before income taxes, and adjusted for specific items that are required to be recognized in the period in which they are incurred.

    The effective tax rate for the three months ended September 30, 2022 decreased by 3.8 percentage points compared to the three months ended September 30, 2021 from 23.7% to 19.9% primarily due to differences in the income mix, including higher and non-deductible expenses that did not recur in the current period, and differences in the magnitude of discrete events in both periods.


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Note 11 - Shareholders' Equity

    The changes in ordinary and treasury shares during the three months ended September 30, 2022 and 2021 were as follows:

Ordinary SharesTreasury Shares
(shares and $ in millions)Number of SharesAmountNumber of SharesAmount
Balance as of June 30, 20211,538 $15 3 $(29)
Share buy-back / cancellations(5) 
Options exercised and shares vested(10)110