UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (IRS Employer | |
incorporation or organization) | Identification No.) |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol | Name of each exchange on which registered |
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.
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).
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.
Accelerated filer ☐ | Non-accelerated filer ☐ | |
Smaller reporting company | Emerging growth company |
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
The number of shares of common stock, par value $.01, of O-I Glass, Inc. outstanding as of June 30, 2024 was
Part I — FINANCIAL INFORMATION
Item 1. Financial Statements.
The Condensed Consolidated Financial Statements of O-I Glass, Inc. (the “Company”) presented herein are unaudited but, in the opinion of management, reflect all adjustments necessary to present fairly such information for the periods and at the dates indicated. All adjustments are of a normal recurring nature. Because the following unaudited Condensed Consolidated Financial Statements have been prepared in accordance with Article 10 of Regulation S-X, they do not contain all information and footnotes normally contained in annual consolidated financial statements; accordingly, they should be read in conjunction with the Consolidated Financial Statements and notes thereto appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
1
O-I GLASS, INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(Dollars in millions, except per share amounts)
(Unaudited)
Three months ended | Six months ended | |||||||||||||
June 30, | June 30, | |||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
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$ | | $ | | $ | | $ | | |||||||
Cost of goods sold |
| ( |
| ( |
| ( |
| ( | ||||||
Gross profit |
| | | | | |||||||||
Selling and administrative expense |
| ( | ( | ( | ( | |||||||||
Research, development and engineering expense |
| ( | ( | ( | ( | |||||||||
Interest expense, net |
| ( | ( | ( | ( | |||||||||
Equity earnings |
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Other expense, net |
| ( | ( | ( | ( | |||||||||
Earnings before income taxes |
| |
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Provision for income taxes |
| ( | ( | ( | ( | |||||||||
Net earnings |
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Net earnings attributable to non-controlling interests |
| ( | ( | ( | ( | |||||||||
Net earnings attributable to the Company | $ | | $ | | $ | | $ | | ||||||
Basic earnings per share: | ||||||||||||||
Net earnings attributable to the Company | $ | | $ | | $ | | $ | | ||||||
Weighted average shares outstanding (thousands) | | | | | ||||||||||
Diluted earnings per share: | ||||||||||||||
Net earnings attributable to the Company | $ | | $ | | $ | | $ | | ||||||
Weighted average diluted shares outstanding (thousands) | | | | | ||||||||||
See accompanying notes.
2
O-I GLASS, INC.
CONDENSED CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
(Unaudited)
Three months ended | Six months ended | |||||||||||||
June 30, | June 30, | |||||||||||||
|
| 2024 |
| 2023 |
| 2024 |
| 2023 |
|
| ||||
Net earnings | $ | | $ | | $ | | $ | | ||||||
Other comprehensive income (loss): | ||||||||||||||
Foreign currency translation adjustments |
| ( | | ( | | |||||||||
Pension and other postretirement benefit adjustments, net of tax |
| | | ( | ||||||||||
Change in fair value of derivative instruments, net of tax |
| | ( | | ( | |||||||||
Other comprehensive income (loss) | ( | | ( | | ||||||||||
Total comprehensive income (loss) | ( | | ( | | ||||||||||
Comprehensive (income) loss attributable to non-controlling interests |
| | ( | ( | ( | |||||||||
Comprehensive income (loss) attributable to the Company | $ | ( | $ | | $ | ( | $ | | ||||||
See accompanying notes.
3
O-I GLASS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
(Unaudited)
June 30, | December 31, | June 30, | |||||||
2024 | 2023 | 2023 | |||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | | $ | | $ | | |||
Trade receivables, net of allowance of $ |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net | | | | ||||||
Goodwill | | | | ||||||
Intangibles, net | | | | ||||||
Other assets | | | | ||||||
Total assets | $ | | $ | | $ | | |||
Liabilities and share owners’ equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | | $ | | $ | | |||
Short-term loans and long-term debt due within one year | | | | ||||||
Other liabilities | | | | ||||||
Total current liabilities |
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| |
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Long-term debt | | | | ||||||
Other long-term liabilities | | | | ||||||
Share owners' equity | | | | ||||||
Total liabilities and share owners’ equity | $ | | $ | | $ | | |||
See accompanying notes.
4
O-I GLASS, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(Dollars in millions)
(Unaudited)
Six months ended June 30, | ||||||||
| 2024 |
| 2023 |
|
| |||
Cash flows from operating activities: | ||||||||
Net earnings | $ | | $ | | ||||
Non-cash charges | ||||||||
Depreciation and amortization |
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Pension expense |
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Stock-based compensation expense | | | ||||||
Legacy environmental charge | | |||||||
Cash payments | ||||||||
Pension contributions |
| ( | ( | |||||
Cash paid for restructuring activities |
| ( | ( | |||||
Change in components of working capital |
| ( | ( | |||||
Other, net (a) | | | ||||||
Cash provided by (utilized in) operating activities |
| ( |
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Cash flows from investing activities: | ||||||||
Cash payments for property, plant and equipment |
| ( | ( | |||||
Contributions and advances to joint ventures | ( | |||||||
Net cash proceeds related to disposal of misc. assets | | | ||||||
Net cash proceeds (payments) from hedging activities | ( | | ||||||
Cash utilized in investing activities |
| ( |
| ( | ||||
Cash flows from financing activities: | ||||||||
Changes in borrowings, net | | | ||||||
Payment of finance fees | ( | ( | ||||||
Shares repurchased | ( | ( | ||||||
Net cash payments for hedging activity | ( | |||||||
Distributions to non-controlling interests | ( | ( | ||||||
Other, net | ( | ( | ||||||
Cash provided by financing activities |
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Effect of exchange rate fluctuations on cash |
| ( | | |||||
Change in cash |
| ( |
| ( | ||||
Cash at beginning of period |
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Cash at end of period | $ | | $ | | ||||
| (a) | Other, net includes other non-cash charges plus other changes in non-current assets and liabilities. |
See accompanying notes.
5
O-I GLASS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Tabular data dollars in millions, except per share amounts
1. Segment Information
The Company has
The Company’s measure of profit for its reportable segments is segment operating profit, which consists of consolidated earnings before interest income, interest expense, and provision for income taxes and excludes amounts related to certain items that management considers not representative of ongoing operations and other adjustments, as well as certain retained corporate costs. The Company’s management, including the chief operating decision maker (defined as the Chief Executive Officer), uses segment operating profit, supplemented by net sales and selected cash flow information, to evaluate segment performance and allocate resources. Segment operating profit for reportable segments includes an allocation of some corporate expenses based on both a percentage of sales and direct billings based on the costs of specific services provided. Segment operating profit is not a recognized term under accounting principles generally accepted in the United States (“U.S. GAAP”) and, therefore, does not purport to be an alternative to earnings before income taxes. Further, the Company's measure of segment operating profit may not be comparable to similarly titled measures used by other companies.
Financial information for the three and six months ended June 30, 2024 and 2023 regarding the Company’s reportable segments is as follows:
| Three months ended June 30, | Six months ended June 30, | |||||||||||
2024 |
| 2023 |
| 2024 |
| 2023 |
| ||||||
Net sales: | |||||||||||||
Americas | $ | | $ | | $ | | $ | | |||||
Europe |
| |
| |
| | | ||||||
Reportable segment totals |
| |
| |
| |
| | |||||
Other |
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Net sales | $ | | $ | | $ | | $ | | |||||
6
Three months ended June 30, | Six months ended June 30, | ||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| |||||
Earnings before income taxes | $ | | $ | | $ | | $ | | |||||
Items excluded from segment operating profit: | |||||||||||||
Retained corporate costs and other | | | | | |||||||||
Legacy environmental charge | | | |||||||||||
Interest expense, net | | | | | |||||||||
Segment operating profit | $ | | $ | | $ | | $ | | |||||
Americas | $ | | $ | | $ | | $ | | |||||
Europe | | | | | |||||||||
Reportable segment totals | $ | | $ | | $ | | $ | | |||||
Financial information regarding the Company’s total assets is as follows:
June 30, | December 31, | June 30, | ||||||||
| 2024 | 2023 | 2023 | |||||||
Total assets: | ||||||||||
Americas |
| $ | |
| $ | |
| $ | | |
Europe |
| |
| |
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Reportable segment totals |
| |
| |
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Other |
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Consolidated totals |
| $ | |
| $ | |
| $ | | |
2. Revenue
Revenue is recognized at a point in time when obligations under the terms of the Company’s contracts and related purchase orders with its customers are satisfied. This occurs with the transfer of control of glass containers, which primarily takes place when products are shipped from the Company’s manufacturing or warehousing facilities to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods, which includes estimated provisions for rebates, discounts, returns and allowances. Amounts billed to customers related to shipping and handling or other pass-through items are included in net sales in the Condensed Consolidated Results of Operations. Sales, value-added, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. The Company’s payment terms are based on customary business practices and can vary by customer type. The term between invoicing and when payment is due is not significant. Also, the Company elected to account for shipping and handling costs as a fulfillment cost at the time of shipment.
For the three- and six-month periods ended June 30, 2024 and June 30, 2023, the Company had no material bad debt expense, and there were no material contract assets, contract liabilities or deferred contract costs recorded on the Condensed Consolidated Balance Sheets. For the three- and six-month periods ended June 30, 2024 and June 30, 2023, revenue recognized from prior periods was not material.
7
The following tables for the three months ended June 30, 2024 and 2023 disaggregate the Company’s revenue by customer end use:
Three months ended June 30, 2024 | |||||||||
| Americas | Europe | Total | ||||||
Alcoholic beverages (beer, wine, spirits) |
| $ | |
| $ | |
| $ | |
Food and other |
| |
| |
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Non-alcoholic beverages |
| |
| |
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Reportable segment totals | $ | | $ | | $ | | |||
Other |
| | |||||||
Net sales |
| $ | | ||||||
Three months ended June 30, 2023 | |||||||||
| Americas | Europe | Total | ||||||
Alcoholic beverages (beer, wine, spirits) |
| $ | | $ | | $ | | ||
Food and other |
| | |
| | ||||
Non-alcoholic beverages |
| | |
| | ||||
Reportable segment totals | $ | | $ | | $ | | |||
Other |
| | |||||||
Net sales |
| $ | | ||||||
The following tables for the six months ended June 30, 2024 and 2023 disaggregate the Company’s revenue by customer end use:
Six months ended June 30, 2024 | |||||||||
| Americas | Europe | Total | ||||||
Alcoholic beverages (beer, wine, spirits) |
| $ | |
| $ | | $ | | |
Food and other |
| |
| |
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Non-alcoholic beverages |
| |
| |
| | |||
Reportable segment totals | $ | | $ | | $ | | |||
Other |
| | |||||||
Net sales |
| $ | | ||||||
Six months ended June 30, 2023 | |||||||||
| Americas | Europe | Total | ||||||
Alcoholic beverages (beer, wine, spirits) |
| $ | | $ | | $ | | ||
Food and other |
| | |
| | ||||
Non-alcoholic beverages |
| | |
| | ||||
Reportable segment totals | $ | | $ | | $ | | |||
Other |
| | |||||||
Net sales |
| $ | | ||||||
8
3. Credit Losses
The Company is exposed to credit losses primarily through its sales of glass containers to customers. The Company’s trade receivables from customers are due within one year or less. The Company assesses each customer’s ability to pay for the glass containers it sells to them by conducting a credit review. The credit review considers the expected billing exposure and timing for payment and the customer’s established credit rating or the Company’s assessment of the customer’s creditworthiness, based on an analysis of their financial statements when a credit rating is not available. The Company also considers contract terms and conditions, country and political risk, and business strategy in its evaluation. A credit limit is established for each customer based on the outcome of this review. The Company may require collateralized asset support or a prepayment to mitigate credit risk. The Company monitors its ongoing credit exposure through the active review of customer balances against contract terms and due dates, including timely account reconciliation, dispute resolution and payment confirmation. The Company may employ collection agencies and legal counsel to pursue the recovery of defaulted receivables.
At June 30, 2024 and June 30, 2023, the Company reported $
4. Inventories
Major classes of inventory at June 30, 2024, December 31, 2023 and June 30, 2023 are as follows:
June 30, | December 31, | June 30, | |||||||||
| 2024 |
| 2023 |
| 2023 | ||||||
Finished goods | $ | | $ | | $ | | |||||
Raw materials |
| |
| |
| | |||||
Operating supplies |
| |
| |
| | |||||
$ | | $ | | $ | | ||||||
5. Derivative Instruments
The Company has certain derivative assets and liabilities, which consist of natural gas forwards and collars, foreign exchange option and forward contracts, interest rate swaps and cross-currency swaps. The valuation of these instruments is determined primarily using the income approach, including discounted cash flow analysis on the expected cash flows of each derivative. Natural gas prices, foreign exchange rates and interest rates are the significant inputs into the valuation models. The Company also evaluates counterparty risk in determining fair values. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. Estimates of the fair value of foreign currency and commodity derivative instruments are determined using exchange traded prices and rates. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. These inputs are observable in active markets over the terms of the instruments the Company holds, and, accordingly, the Company classifies its derivative assets and liabilities as Level 2 in the hierarchy.
Commodity Forward Contracts and Collars Designated as Cash Flow Hedges
The Company has entered into commodity forward contracts and collars related to forecasted natural gas requirements, the objective of which are to limit the effects of fluctuations in future market prices of natural gas and the related volatility in cash flows.
An unrecognized loss of $
9
Cash Flow Hedges of Foreign Exchange Risk
The Company has variable-interest rate borrowings denominated in currencies other than the functional currency of the borrowing subsidiaries. As a result, the Company is exposed to fluctuations in the currency of the borrowing against the subsidiaries’ functional currency. In addition, one of the Company’s non-U.S. dollar-functional-currency subsidiaries purchases a raw material in the normal course of business for use in glass container production that is priced in U.S. dollars. Such purchases expose the Company to exchange rate fluctuations. The Company uses derivatives to manage these exposures and designates these derivatives as cash flow hedges of foreign currency exchange risk.
Fair Value Hedges of Foreign Exchange Risk
The Company has fixed and variable interest rate borrowings denominated in currencies other than the functional currency of the borrowing subsidiaries. As a result, the Company is exposed to fluctuations in the currency of the borrowing against the subsidiaries’ functional currency. The Company uses derivatives to manage these exposures and designates these derivatives as fair value hedges of foreign currency exchange risk. Approximately $
Interest Rate Swaps Designated as Fair Value Hedges
The Company enters into interest rate swaps in order to maintain a capital structure containing targeted amounts of fixed and floating-rate debt and manage interest rate risk. The Company’s fixed-to-variable interest rate swaps are accounted for as fair value hedges. The relevant terms of the swap agreements match the corresponding terms of the notes, and therefore, there is no hedge ineffectiveness. The Company recorded the net of the fair market values of the swaps as a long-term liability and short-term asset, along with a corresponding net decrease in the carrying value of the hedged debt.
Net Investment Hedges
The Company is exposed to fluctuations in foreign exchange rates on investments it holds in non-U.S. subsidiaries and uses cross-currency swaps to partially hedge this exposure.
Foreign Exchange Derivative Contracts Not Designated as Hedging Instruments
The Company uses short-term forward exchange or option agreements to purchase foreign currencies at set rates in the future. These agreements are used to limit exposure to fluctuations in foreign currency exchange rates for significant planned purchases of fixed assets or commodities that are denominated in currencies other than the subsidiaries’ functional currency. The Company also uses foreign exchange agreements to offset the foreign currency exchange rate risk for receivables and payables, including intercompany receivables, payables, and loans, not denominated in, or indexed to, their functional currencies.
10
Balance Sheet Classification
The following table shows the amount and classification (as noted above) of the Company’s derivatives at June 30, 2024, December 31, 2023 and June 30, 2023:
Fair Value of | Fair Value of | |||||||||||||||||
Hedge Assets | Hedge Liabilities | |||||||||||||||||
June 30, | December 31, | June 30, | June 30, | December 31, | June 30, | |||||||||||||
| 2024 |
| 2023 |
| 2023 |
| 2024 |
| 2023 |
| 2023 | |||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
| ||||||||||||
Commodity forward contracts and collars (a) | $ | — | $ | — | $ | — | $ | | $ | | $ | | ||||||
Cash flow hedges of foreign exchange risk (b) | | |||||||||||||||||
Fair value hedges of foreign exchange risk (c) | | | | | | | ||||||||||||
Net investment hedges (d) | | | | | | | ||||||||||||
Total derivatives accounted for as hedges | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Derivatives not designated as hedges: | ||||||||||||||||||
Foreign exchange derivative contracts (e) | | | | | | | ||||||||||||
Total derivatives | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Current | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Noncurrent | | | | |||||||||||||||
Total derivatives | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
| (a) | The notional amount of the commodity forward contracts and collars was approximately |
| (b) | The notional amounts of the cash flow hedges of foreign exchange risk were |
| (c) | The notional amounts of the fair value hedges of foreign exchange risk were $ |
| (d) | The notional amounts of the net investment hedges were € |
| (e) | The notional amounts of the foreign exchange derivative contracts were $ |
11