10-Q 1 oi-20220331x10q.htm 10-Q UNITED STATES
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

March 31, 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 1-9576

Graphic

O-I GLASS, INC.

(Exact name of registrant as specified in its charter)

Delaware

22-2781933

(State or other jurisdiction of

(IRS Employer

incorporation or organization)

Identification No.)

One Michael Owens Way, Perrysburg, Ohio

43551

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (567) 336-5000

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

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, $.01 par value

OI

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

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

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.

Large accelerated filer

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 No

The number of shares of common stock, par value $.01, of O-I Glass, Inc. outstanding as of March 31, 2022 was 156,215,929.

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, 2021.

The term “Company,” as used herein and unless otherwise stated or indicated by context, refers to Owens-Illinois, Inc. (“O-I”) prior to the Corporate Modernization (as defined in Note 10) and to O-I Glass, Inc. (“O-I Glass”) after the Corporate Modernization.

1

O-I GLASS, INC.

CONDENSED CONSOLIDATED RESULTS OF OPERATIONS

(Dollars in millions, except per share amounts)
(Unaudited)

Three months ended

March 31,

2022

    

2021

    

 

Net sales

$

1,692

$

1,500

Cost of goods sold

 

(1,388)

 

(1,256)

Gross profit

304

244

Selling and administrative expense

(119)

(102)

Research, development and engineering expense

(23)

(18)

Interest expense, net

(66)

(51)

Equity earnings

23

18

Other income (expense), net

51

(156)

Earnings (loss) before income taxes

 

170

 

(65)

Provision for income taxes

(48)

(26)

Net earnings (loss)

 

122

 

(91)

Net earnings attributable to non-controlling interests

(34)

(6)

Net earnings (loss) attributable to the Company

$

88

$

(97)

Basic earnings per share:

Net earnings (loss) attributable to the Company

$

0.56

$

(0.62)

Weighted average shares outstanding (thousands)

155,849

157,571

Diluted earnings per share:

Net earnings (loss) attributable to the Company

$

0.55

$

(0.62)

Weighted average diluted shares outstanding (thousands)

158,798

157,571

See accompanying notes.

2

O-I GLASS, INC.

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Dollars in millions)

(Unaudited)

Three months ended

March 31,

    

2022

    

2021

    

 

Net earnings (loss)

$

122

$

(91)

Other comprehensive income (loss):

Foreign currency translation adjustments

135

(85)

Pension and other postretirement benefit adjustments, net of tax

18

20

Change in fair value of derivative instruments, net of tax

3

13

Other comprehensive income (loss)

156

(52)

Total comprehensive income (loss)

278

(143)

Comprehensive income attributable to non-controlling interests

(39)

(2)

Comprehensive income (loss) attributable to the Company

$

239

$

(145)

See accompanying notes.

3

O-I GLASS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(Unaudited)

March 31,

December 31,

March 31,

2022

2021

2021

Assets

Current assets:

Cash and cash equivalents

$

519

$

725

$

742

Trade receivables, net of allowance of $30 million, $28 million, and $32 million at March 31, 2022, December 31, 2021 and March 31, 2021

 

900

 

692

 

714

Inventories

 

837

 

816

 

827

Prepaid expenses and other current assets

 

234

 

237

 

203

Assets held for sale

49

Total current assets

 

2,490

 

2,519

 

2,486

Property, plant and equipment, net

2,833

2,817

2,791

Goodwill

1,863

1,840

1,880

Intangibles, net

283

286

310

Other assets

1,408

1,370

1,358

Total assets

$

8,877

$

8,832

$

8,825

Liabilities and Share owners’ equity

Current liabilities:

Accounts payable

$

1,169

$

1,210

$

998

Short-term loans and long-term debt due within one year

67

72

180

Other liabilities

514

551

524

Liabilities held for sale

13

Total current liabilities

 

1,750

 

1,846

 

1,702

Long-term debt

4,621

4,753

5,168

Paddock support agreement liability

625

625

625

Other long-term liabilities

779

781

1,068

Share owners' equity

1,102

827

262

Total liabilities and share owners’ equity

$

8,877

$

8,832

$

8,825

See accompanying notes.

4

O-I GLASS, INC.

CONDENSED CONSOLIDATED CASH FLOWS

(Dollars in millions)

(Unaudited)

Three months ended March 31,

    

2022

    

2021

 

 

Cash flows from operating activities:

Net earnings (loss)

$

122

$

(91)

Non-cash charges

Depreciation and amortization

 

116

115

Pension expense

 

8

8

Charge related to Paddock support agreement liability

154

Gain on sale of divested business

(55)

Cash payments

Pension contributions

 

(6)

(18)

Cash paid for restructuring activities

 

(4)

(3)

Change in components of working capital

 

(259)

(229)

Other, net (a)

5

8

Cash utilized in operating activities

 

(73)

 

(56)

Cash flows from investing activities:

Cash payments for property, plant and equipment

 

(96)

(93)

Cash proceeds on disposal of other businesses and misc. assets

96

4

Cash proceeds on sale of ANZ businesses, net of transaction costs

58

Other

(2)

Cash utilized in investing activities

 

(2)

 

(31)

Cash flows from financing activities:

Changes in borrowings, net

(112)

290

Payment of finance fees

(20)

Shares repurchased

(10)

Net cash payments for hedging activity

(7)

Issuance of common stock and other

(3)

(2)

Cash provided by (utilized in) financing activities

 

(152)

 

288

Effect of exchange rate fluctuations on cash

 

21

(22)

Change in cash

 

(206)

 

179

Cash at beginning of period

 

725

563

Cash at end of period

$

519

$

742

(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 two reportable segments and two operating segments based on its geographic locations: the Americas and Europe. These two segments are aligned with the Company’s internal approach to managing, reporting, and evaluating performance of its global glass operations. Certain assets and activities not directly related to one of the segments or to glass manufacturing are reported with Retained corporate costs and other. These include licensing, equipment manufacturing, global engineering, certain equity investments and the remaining businesses in the Asia Pacific region that do not meet the criteria of an individually reportable segment after the sale of the Company’s Australia and New Zealand businesses in 2020. Retained corporate costs and other also includes certain headquarters administrative and facilities costs and certain incentive compensation and other benefit plan costs that are global in nature and are not allocable to the reportable segments.

The Company’s measure of profit for its reportable segments is segment operating profit, which consists of consolidated earnings (loss) before interest income, interest expense, and benefit (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 our chief executive officer), uses segment operating profit, in combination with net sales and selected cash flow information, to evaluate performance and to 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 U.S. GAAP and, therefore, does not purport to be an alternative to earnings (loss) before income taxes. Further, the Company's measure of segment operating profit may not be comparable to similarly titled measures of other companies.

Financial information for the three months ended March 31, 2022 and 2021 regarding the Company’s reportable segments is as follows:

    

Three months ended March 31,

2022

 

2021

 

Net sales:

Americas

$

940

$

837

Europe

 

708

639

Reportable segment totals

 

1,648

 

1,476

Other

44

24

Net sales

$

1,692

$

1,500

Three months ended March 31,

    

2022

    

2021

 

Earnings (loss) before income taxes

$

170

$

(65)

Items excluded from segment operating profit:

Retained corporate costs and other

50

35

Gain on sale of divested business

(55)

Charge related to Paddock support agreement liability

154

Interest expense, net

66

51

Segment operating profit

$

231

$

175

Americas

129

100

Europe

102

75

Reportable segment totals

$

231

$

175

6

Financial information regarding the Company’s total assets is as follows:

March 31,

December 31,

March 31,

    

2022

2021

2021

Total assets:

Americas

 

$

5,097

 

$

4,853

 

$

4,755

Europe

 

3,378

 

3,513

 

3,536

Reportable segment totals

 

8,475

 

8,366

 

8,291

Other

 

402

466

534

Consolidated totals

 

$

8,877

 

$

8,832

 

$

8,825

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. 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-month periods ended March 31, 2022 and March 31, 2021, 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 Sheet.

The following tables for the three months ended March 31, 2022 and 2021 disaggregate the Company’s revenue by customer end use:

Three months ended March 31, 2022

    

Americas

Europe

Total

Alcoholic beverages (beer, wine, spirits)

 

$

575

 

$

536

 

$

1,111

Food and other

 

214

 

110

 

324

Non-alcoholic beverages

 

151

 

62

 

213

Reportable segment totals

$

940

$

708

$

1,648

Other

 

44

Net sales

 

$

1,692

Three months ended March 31, 2021

    

Americas

Europe

Total

Alcoholic beverages (beer, wine, spirits)

 

$

502

$

477

$

979

Food and other

 

209

118

 

327

Non-alcoholic beverages

 

126

44

 

170

Reportable segment totals

$

837

$

639

$

1,476

Other

 

24

Net sales

 

$

1,500


7

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 March 31, 2022 and March 31, 2021, the Company reported $900 million and $714 million of accounts receivable, respectively, net of allowances of $30 million and $32 million, respectively. Changes in the allowance were not material for each of the three months ended March 31, 2022 and March 31, 2021.

4. Inventories

Major classes of inventory at March 31, 2022, December 31, 2021 and March 31, 2021 are as follows:

March 31,

December 31,

March 31,

    

2022

    

2021

    

2021

Finished goods

$

676

$

659

$

672

Raw materials

 

121

 

119

 

119

Operating supplies

 

40

 

38

 

36

$

837

$

816

$

827

5. Derivative Instruments

The Company has certain derivative assets and liabilities, which consist of 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. 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. 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.

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 exchange risk.

An unrecognized gain of $1 million at March 31, 2022, an unrecognized gain of $6 million at December 31, 2021 and an unrecognized gain of $10 million at March 31, 2021, related to these cross-currency swaps, was included in Accumulated OCI, and will be reclassified into earnings within the next 12 months.

8

Fair Value Hedges of Foreign Exchange Risk

The Company has fixed 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 exchange risk. Approximately $5 million of the components were excluded from the assessment of effectiveness and are included in Accumulated OCI at March 31, 2022 and December 31, 2021.

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.

9

Balance Sheet Classification

The following table shows the amount and classification (as noted above) of the Company’s derivatives at March 31, 2022, December 31, 2021 and March 31, 2021:

Fair Value of

Fair Value of

Hedge Assets

Hedge Liabilities

March 31,

December 31,

March 31,

March 31,

December 31,

March 31,

    

2022

    

2021

    

2021

    

2022

    

2021

    

2021

Derivatives designated as hedging instruments:

    

    

    

    

    

    

Interest rate swaps - fair value hedges (a)

$

$

4

$

13

$

20

$

2

$

Cash flow hedges of foreign exchange risk (b)

2

8

1

23

67

Fair value hedges of foreign exchange risk (c)

12

9

5

Net investment hedges (d)

2

3

2

15

17

39

Total derivatives accounted for as hedges

$

14

$

18

$

23

$

41

$

42

$

106

Derivatives not designated as hedges:

Foreign exchange derivative contracts (e)

6

1

5

2

3

Total derivatives

$

20

$

19

$

28

$

41

$

44

$

109

Current

$

14

$

14

$

18

$

2

$

2

$

9

Noncurrent

6

5

10

39

42

100

Total derivatives

$

20

$

19

$

28

$

41

$

44

$

109

(a) The notional amounts of the interest rate swaps designated as fair value hedges were €725 million at March 31, 2022, December 31, 2021 and March 31, 2021. The maximum maturity dates were in 2024 at March 31, 2022, December 31, 2021 and March 31, 2021.

(b) The notional amounts of the cash flow hedges of foreign exchange risk were 764 million Mexican pesos at March 31, 2022, $422 million at December 31, 2021 and $978 million at March 31, 2021. The maximum maturity dates were in 2022 at March 31, 2022 and in 2023 at December 31, 2021 and March 31, 2021.

(c) The notional amounts of the fair value hedges of foreign exchange risk were $850 million at March 31, 2022 and $400 million at December 31, 2021. The maximum maturity dates were in 2030 at March 31, 2022 and December 31, 2021.

(d) The notional amounts of the net investment hedges were €311 million at March 31, 2022, December 31, 2021 and March 31, 2021. The maximum maturity dates were in 2027 for March 31, 2022, December 31, 2021 and March 31, 2021.

(e) The notional amounts of the foreign exchange derivative contracts were $446 million, $202 million and $301 million at March 31, 2022, December 31, 2021 and March 31, 2021, respectively. The maximum maturity dates were in 2022 for all three periods.

10

Gain (Loss) Recognized in OCI (Effective Portion)

Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (1)

Three months ended March 31,

Three months ended March 31,

Derivatives designated as hedging instruments:

 

2022

2021

2022

2021

Cash Flow Hedges

    

    

    

    

    

    

Cash flow hedges of foreign exchange risk (a)

$

13

$

48

$

14

$

49

Net Investment Hedges

Net Investment Hedges (b)

3

15

1

1

$

16

$

63

$

15

$

50

Amount of Gain (Loss) Recognized in Other income (expense), net

Three months ended March 31,

Derivatives not designated as hedges:

 

2022

2021

Foreign exchange derivative contracts

    

$

2

    

$

10

    

(1)
Gains and losses reclassified from Accumulated OCI and recognized in income are recorded to (a) other income (expense), net or (b) interest expense, net.

6. Restructuring Accruals

Selected information related to the restructuring accruals for the three months ended March 31, 2022 and 2021 is as follows:

Employee

Asset

Other

Total

    

Costs

Impairment

Exit Costs

Restructuring

Balance at January 1, 2022

$

20

$

$

11

$

31

Net cash paid, principally severance and related benefits

 

(3)

(1)

 

(4)

Balance at March 31, 2022

$

17

$

$

10

$

27

Employee

Asset

Other

Total

Costs

Impairment

Exit Costs

Restructuring

Balance at January 1, 2021

$

38

$

$

7

$

45

Net cash paid, principally severance and related benefits

 

(3)

 

(3)

Other, including foreign exchange translation

 

1

 

1

Balance at March 31, 2021

$

35

$

$

8

$

43

When a decision is made to take restructuring actions, the Company manages and accounts for them programmatically apart from the ongoing operations of the business. Information related to major programs is presented separately, while minor initiatives are presented on a combined basis. As of March 31, 2022 and 2021, no major restructuring programs were in effect.

11

7. Pension Benefit Plans

The components of the net periodic pension cost for the three months ended March 31, 2022 and 2021 are as follows:

U.S.

Non-U.S.

 

Three months ended March 31,

Three months ended March 31,

    

2022

    

2021

    

2022

    

2021

 

Service cost

$

3

$

3

$

2

$

3

Interest cost

 

9

 

10

 

6

 

5

Expected asset return

(15)

(21)

(11)

(11)

Amortization of actuarial loss

11

16

3

3

Net periodic pension cost

$

8

$

8

$

$

The components of pension expense, other than the service cost component, are included in Other income (expense), net on the Condensed Consolidated Results of Operations.

8. Income Taxes

The Company calculates its interim tax provision using the estimated annual effective tax rate (“EAETR”) methodology in accordance with ASC 740-270. The EAETR is applied to the year-to-date ordinary income, exclusive of discrete items. The tax effects of discrete items are then included to arrive at the total reported interim tax provision. The determination of the EAETR is based upon a number of estimates, including the estimated annual pretax ordinary income or loss in each tax jurisdiction in which the Company operates. The tax effects of discrete items are recognized in the tax provision in the quarter they occur, in accordance with GAAP. Depending on various factors, such as the item’s significance in relation to total income and the rate of tax applicable in the jurisdiction to which it relates, discrete items in any quarter can materially impact the reported effective tax rate. The Company’s annual effective tax rate may be affected by the mix of earnings in the U.S. and foreign jurisdictions, and factors such as changes in tax laws, tax rates or regulations, changes in business, changing interpretation of existing tax laws or regulations, the finalization of tax audits and reviews, as well as other factors. As such, there can be significant volatility in interim tax provisions. The annual effective tax rate differs from the statutory U.S. Federal tax rate of 21% primarily because of varying non-U.S. tax rates and the impact of the U.S. valuation allowance.

The Company is currently under income tax examination in various tax jurisdictions in which it operates, including Brazil, Canada, Colombia, France, Indonesia, Mexico and Peru. The years under examination range from 2004 through 2020. The Company has received tax assessments in excess of established reserves. The Company is contesting these tax assessments, and will continue to do so, including pursuing all available remedies, such as appeals and litigation, if necessary. The Company believes that adequate provisions for all income tax uncertainties have been made. However, if tax assessments are settled against the Company at amounts in excess of established reserves, it could have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

12

9. Debt

The following table summarizes the long-term debt of the Company at March 31, 2022, December 31, 2021, and March 31, 2021:

March 31,

December 31,

March 31,

    

2022

    

2021

    

2021

Secured Credit Agreement:

Revolving Credit Facility:

Revolving Loans

$

100

$

$

Term Loans:

Term Loan A

946

Previous Secured Credit Agreement:

Revolving Credit Facility:

Revolving Loans

292

Term Loans:

Term Loan A

923

1,068

Other secured debt

110

Senior Notes:

4.00%, due 2023

308

5.875%, due 2023

547

695

692

3.125%, due 2024 (€725 million)

793

826

866

6.375%, due 2025

297

297

296

5.375%, due 2025

298

298

298

2.875%, due 2025 (€500 million)

553

561

579

6.625%, due 2027

606

693

692

4.750%, due 2030

395

395

Finance leases

108

98

102

Other

 

4

5

6

Total long-term debt

 

4,647

 

4,791

5,309

Less amounts due within one year

 

26

38

141

Long-term debt

$

4,621

$

4,753

$

5,168

The Company presents debt issuance costs in the Condensed Consolidated Balance Sheet as a deduction of the carrying amount of the related debt liability.

On March 25, 2022, certain of the Company’s subsidiaries entered into a Credit Agreement and Syndicated Facility Agreement (the “Agreement”), which refinances in full the previous credit agreement (the “Previous Agreement”). The Agreement provides for up to $2.8 billion of borrowings pursuant to term loans, revolving credit facilities and a delayed draw term loan facility. The delayed draw term loan facility allows for a one-time borrowing of up to $600 million, the proceeds of which, if borrowed, will be used, in addition to other consideration paid by the Company and/or its subsidiaries, to directly or indirectly fund a trust to be established in connection with the plan of reorganization proposed by Paddock Enterprises, LLC (“Paddock”) and certain other parties in Paddock’s Chapter 11 case (see Note 10 for more information). The term loans mature, and the revolving credit facilities terminate, in March 2027. The delayed draw term loan, if borrowed, matures in December 2023. The Company recorded approximately $2 million of additional interest charges for third-party fees and the write-off of unamortized fees related to the Agreement in the first quarter of 2022.

At March 31, 2022, the Agreement includes a $300 million revolving credit facility, a $950 million multicurrency revolving credit facility and $950 million in term loan A facilities ($946 million outstanding balance at March 31, 2022, net of debt issuance costs). At March 31, 2022, the Company had unused credit of $1,140 million available under the Agreement. The weighted average interest rate on borrowings outstanding under the Agreement at March 31, 2022 was 2.12%.

13

The Agreement contains various covenants that restrict, among other things and subject to certain exceptions, the ability of the Company to incur certain indebtedness and liens, make certain investments, become liable under contingent obligations in certain defined instances only, make restricted payments, make certain asset sales within guidelines and limits, engage in certain affiliate transactions, participate in sale and leaseback financing arrangements, alter its fundamental business, and amend certain subordinated debt obligations.

The Agreement also contains one financial maintenance covenant, a Secured Leverage Ratio (as defined in the Agreement), that requires the Company not to exceed a ratio of 2.50x calculated by dividing consolidated Net Indebtedness that is then secured by Liens on property or assets of the Company and certain of its subsidiaries by Consolidated EBITDA, as each term is defined and as described in the Credit Agreement. The Leverage Ratio could restrict the ability of the Company to undertake additional financing or acquisitions to the extent that such financing or acquisitions would cause the Leverage Ratio to exceed the specified maximum.

Failure to comply with these covenants and restrictions could result in an event of default under the Agreement. In such an event, the Company could not request borrowings under the revolving facilities, and all amounts outstanding under the Agreement, together with accrued interest, could then be declared immediately due and payable. Upon the occurrence and for the duration of a payment event of default, an additional default interest rate equal to 2.0% per annum will apply to all overdue obligations under the Agreement. If an event of default occurs under the Agreement and the lenders cause all of the outstanding debt obligations under the Agreement to become due and payable, this would result in a default under the indentures governing the Company’s outstanding debt securities and could lead to an acceleration of obligations related to these debt securities. As of March 31, 2022, the Company was in compliance with all covenants and restrictions in the Agreement.  In addition, the Company believes that it will remain in compliance and that its ability to borrow funds under the Agreement will not be adversely affected by the covenants and restrictions.