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, 2020

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, 2020 was 156,571,353.

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, 2019.

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,

2020

    

2019

    

 

Net sales

$

1,561

$

1,638

Cost of goods sold

 

(1,293)

 

(1,340)

Gross profit

268

298

Selling and administrative expense

(116)

(115)

Research, development and engineering expense

(16)

(16)

Interest expense, net

(53)

(65)

Equity earnings

15

19

Other expense, net

(17)

(10)

Earnings before income taxes

 

81

 

111

Provision for income taxes

(26)

(27)

Net earnings

 

55

 

84

Net earnings attributable to noncontrolling interests

(5)

(5)

Net earnings attributable to the Company

$

50

$

79

Basic earnings per share:

Net earnings attributable to the Company

$

0.32

$

0.51

Weighted average shares outstanding (thousands)

156,081

154,361

Diluted earnings per share:

Net earnings attributable to the Company

$

0.32

$

0.51

Weighted average diluted shares outstanding (thousands)

157,684

156,635

See accompanying notes.

2

O-I GLASS, INC.

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Dollars in millions)

(Unaudited)

Three months ended

March 31,

    

2020

    

2019

    

 

Net earnings

$

55

$

84

Other comprehensive income (loss):

Foreign currency translation adjustments

(573)

49

Pension and other postretirement benefit adjustments, net of tax

31

6

Change in fair value of derivative instruments, net of tax

6

5

Other comprehensive income (loss)

(536)

60

Total comprehensive income (loss)

(481)

144

Comprehensive (income) loss attributable to noncontrolling interests

4

(8)

Comprehensive income (loss) attributable to the Company

$

(477)

$

136

See accompanying notes.

3

O-I GLASS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(Unaudited)

March 31,

December 31,

March 31,

2020

2019

2019

Assets

Current assets:

Cash and cash equivalents

$

891

$

551

$

326

Trade receivables, net of allowance of $30 million, $32 million, and $34 million at March 31, 2020, December 31, 2019 and March 31, 2019

 

767

 

621

 

939

Inventories

 

1,047

 

1,045

 

1,038

Prepaid expenses and other current assets

 

257

 

271

 

276

Total current assets

 

2,962

 

2,488

 

2,579

Property, plant and equipment, net

2,987

3,273

3,074

Goodwill

1,773

1,934

2,507

Intangibles, net

312

371

394

Other assets

1,470

1,544

1,598

Total assets

$

9,504

$

9,610

$

10,152

Liabilities and Share owners’ equity

Current liabilities:

Accounts payable

$

1,025

$

1,276

$

1,065

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

283

124

91

Current portion of asbestos-related liabilities

160

Other liabilities

516

595

544

Total current liabilities

 

1,824

 

1,995

 

1,860

Long-term debt

6,115

5,435

5,820

Asbestos-related liabilities

486

372

Paddock support agreement liability

471

Other long-term liabilities

1,018

1,130

1,090

Share owners' equity

76

564

1,010

Total liabilities and share owners' equity

$

9,504

$

9,610

$

10,152

See accompanying notes.

4

O-I GLASS, INC.

CONDENSED CONSOLIDATED CASH FLOWS

(Dollars in millions)

(Unaudited)

Three months ended March 31,

    

2020

    

2019

 

 

Cash flows from operating activities:

Net earnings

$

55

$

84

Non-cash charges

Depreciation and amortization

 

126

126

Pension expense

 

9

8

Cash payments

Pension contributions

 

(13)

(11)

Asbestos-related payments

 

(71)

Cash paid for restructuring activities

 

(8)

(15)

Change in components of working capital

 

(461)

(697)

Other, net (a)

(23)

(19)

Cash utilized in operating activities

 

(315)

 

(595)

Cash flows from investing activities:

Cash payments for property, plant and equipment

 

(120)

(121)

Contributions and advances to joint ventures

(15)

Net cash proceeds on disposal of assets

1

Deconsolidation of Paddock

(47)

Other

2

Cash utilized in investing activities

 

(165)

 

(135)

Cash flows from financing activities:

Changes in borrowings, net

859

589

Issuance of common stock and other

(2)

(3)

Treasury shares repurchased

(38)

Dividends paid

(8)

(8)

Cash provided by financing activities

 

849

 

540

Effect of exchange rate fluctuations on cash

 

(29)

4

Increase (Decrease) in cash

 

340

 

(186)

Cash at beginning of period

 

551

512

Cash at end of period

$

891

$

326

(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 three reportable segments and three operating segments based on its geographic locations: Americas, Europe and Asia Pacific. These three 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 regions or to glass manufacturing are reported with Retained corporate costs and other. These include licensing, equipment manufacturing, global engineering, and certain equity investments. 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 from continuing operations 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, as well as certain retained corporate costs. The Company’s management 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 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, 2020 and 2019 regarding the Company’s reportable segments is as follows:

    

Three months ended March 31,

2020

 

2019

 

Net sales:

Americas

$

831

$

881

Europe

 

576

596

Asia Pacific

 

145

151

Reportable segment totals

 

1,552

 

1,628

Other

9

10

Net sales

$

1,561

$

1,638

Three months ended March 31,

    

2020

    

2019

 

Segment operating profit:

Americas

$

103

$

113

Europe

 

61

 

79

Asia Pacific

 

5

 

8

Reportable segment totals

 

169

 

200

Items excluded from segment operating profit:

Retained corporate costs and other

(21)

(24)

Charge for deconsolidation of Paddock

(14)

Interest expense, net

(53)

(65)

Earnings before income taxes

$

81

$

111

6

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

March 31,

December 31,

March 31,

    

2020

2019

2019

Total assets:

Americas

 

$

4,693

 

$

5,264

 

$

5,621

Europe

 

3,290

 

3,127

 

3,273

Asia Pacific

 

896

 

1,012

 

1,012

Reportable segment totals

 

8,879

 

9,403

 

9,906

Other

 

625

207

246

Consolidated totals

 

$

9,504

 

$

9,610

 

$

10,152

2. Revenue

Revenue is recognized at the 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, 2020 and March 31, 2019, 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. For the three-month periods ended March 31, 2020 and March 31, 2019, revenue recognized from prior periods (for example, due to changes in transaction price) was not material.

The following tables for the three months ended March 31, 2020 and 2019 disaggregates the Company’s revenue by customer end use:

Three months ended March 31, 2020

    

Americas

Europe

Asia Pacific

Total

Alcoholic beverages (beer, wine, spirits)

 

$

508

 

$

411

 

$

101

$

1,020

Food and other

 

189

 

105

 

24

 

318

Non-alcoholic beverages

 

134

 

60

 

20

 

214

Reportable segment totals

$

831

$

576

$

145

$

1,552

Other

 

9

Net sales

 

$

1,561

Three months ended March 31, 2019

    

Americas

Europe

Asia Pacific

Total

Alcoholic beverages (beer, wine, spirits)

 

$

564

$

432

$

109

$

1,105

Food and other

 

180

103

25

 

308

Non-alcoholic beverages

 

137

61

17

 

215

Reportable segment totals

$

881

$

596

$

151

$

1,628

Other

 

10

Net sales

 

$

1,638


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 that it sells 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 recovery of defaulted receivables.

At March 31, 2020, the Company reported $767 million of accounts receivable, net of allowances of $30 million. Changes in the allowance were not material for the three months ended March 31, 2020.

4. Inventories

Major classes of inventory at March 31, 2020, December 31, 2019 and March 31, 2019 are as follows:

March 31,

December 31,

March 31,

    

2020

    

2019

    

2019

    

 

Finished goods

$

884

$

872

$

868

Raw materials

 

121

 

128

 

126

Operating supplies

 

42

 

45

 

44

$

1,047

$

1,045

$

1,038

5. Derivative Instruments

The Company has certain derivative assets and liabilities, which consist of natural gas forwards, 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 forward rates, 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.

Commodity Forward Contracts Designated as Cash Flow Hedges

The Company enters into commodity forward contracts related to forecasted natural gas requirements, the objectives of which are to limit the effects of fluctuations in the future market price paid for natural gas and the related volatility in cash flows.

An unrecognized loss of $2 million at March 31, 2020, an unrecognized gain of $1 million at December 31, 2019 and an unrecognized gain of $3 million at March 31, 2019 related to the commodity forward contracts were included in Accumulated other comprehensive income (“Accumulated OCI”), and will be reclassified into earnings in the period when the commodity forward contracts expire.

8

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 risk for receivables and payables, including intercompany receivables, payables, and loans, not denominated in, or indexed to, their functional currencies.

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.  The Company uses derivatives to manage these exposures and designates these derivatives as cash flow hedges of foreign exchange risk.

An unrecognized loss of $4 million at March 31, 2020, an unrecognized loss of less than $1 million at December 31, 2019 and an unrecognized loss of $11 million at March 31, 2019, related to these cross-currency swaps, were included in Accumulated OCI, and will be reclassified into earnings within the next twelve months.

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.

Cash Flow Hedges of Interest Rate Risk

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. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments. These interest rate swap agreements were used to hedge the variable cash flows associated with variable-rate debt.

An unrecognized loss of less than $1 million at March 31, 2020, an unrecognized loss of $1 million at December 31, 2019 and an unrecognized loss of less than $1 million at March 31, 2019 related to these interest rate swaps, were included in Accumulated OCI, and will be reclassified into earnings within the next twelve months.

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.  

An unrecognized gain of $10 million at March 31, 2020, an unrecognized gain of $8 million at December 31, 2019 and an unrecognized gain of $7 million at March 31, 2019, related to these net investment hedges, were included in Accumulated OCI, and will be reclassified into earnings within the next twelve months.

9

Balance Sheet Classification

The following table shows the amount and classification (as noted above) of the Company’s derivatives at March 31, 2020, December 31, 2019 and March 31, 2019:

Fair Value of

Fair Value of

Hedge Assets

Hedge Liabilities

March 31,

December 31,

March 31,

March 31,

December 31,

March 31,

    

2020

    

2019

    

2019

    

2020

    

2019

    

2019

Derivatives designated as hedging instruments:

    

    

    

    

    

    

Commodity forward contracts (a)

$

$

1

$

3

$

2

$

$

Interest rate swaps - fair value hedges (b)

11

8

18

2

Cash flow hedges of foreign exchange risk (c)

66

25

18

4

21

4

Interest rate swaps - cash flow hedges (d)

2

1

1

Net investment hedges (e)

5

2

6

4

Total derivatives accounted for as hedges

$

82

$

36

$

45

$

8

$

24

$

9

Derivatives not designated as hedges:

Foreign exchange derivative contracts (f)

10

2

2

5

1

Total derivatives

$

92

$

38

$

47

$

13

$

24

$

10

Current

$

30

$

8

$

23

$

8

$

$

3

Noncurrent

62

30

24

5

24

7

Total derivatives

$

92

$

38

$

47

$

13

$

24

$

10

(a) The notional amounts of the commodity forward contracts were $12 million, $13 million and $20 million at March 31, 2020, December 31, 2019 and March 31, 2019, respectively. The maximum maturity dates were in 2020 for all three periods.

(b) The notional amounts of the interest rate swaps designated as fair value hedges were €725 million at March 31, 2020, December 31, 2019 and March 31, 2019, respectively. The maximum maturity dates were in 2025 for March 31, 2020 and December 31, 2019 and 2024 for March 31, 2019.

(c) The notional amounts of the cash flow hedges of foreign exchange risk were $1.424 billion at March 31, 2020 and December 31, 2019 and $797 million at March 31, 2019. The maximum maturity dates were in 2023 for all three periods.

(d) The notional amounts of the interest rate swaps designated as cash flow hedges were $105 million at March 31, 2020 and December 31, 2019 and $180 million at March 31, 2019, respectively. Maximum maturity dates were in 2020 for March 31, 2020 and December 31, 2019 and 2021 for March 31, 2019.

(e) The notional amounts of the net investment hedges were €160 million at March 31, 2020, December 31, 2019 and March 31, 2019. The maximum maturity dates were in 2020 for all three periods.

(f) The notional amounts of the foreign exchange derivative contracts were $306 million, $283 million and $625 million at March 31, 2020, December 31, 2019 and March 31, 2019, respectively. The maximum maturity dates were in 2021, 2019, and 2019 for March 31, 2020, December 31, 2019 and March 31, 2019, respectively.

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:

 

2020

2019

2020

2019

Cash Flow Hedges

    

    

    

    

    

    

Commodity forward contracts (a)

$

(3)

$

2

$

$

Cash flow hedges of foreign exchange risk (b)

(66)

7

60

(10)

Cash flow hedges of interest rate risk (c)

Net Investment Hedges

Net Investment Hedges

(4)

5

2

(2)

$

(73)

$

14

$

62

$

(12)

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

Three months ended March 31,

Derivatives not designated as hedges:

 

2020

2019

Foreign exchange derivative contracts

    

$

12

    

$

6

    

    

(1) Gains and losses reclassified from accumulated OCI and recognized in income are recorded to (a) cost of goods sold, (b) other expense, net or (c) interest expense, net.

6. Restructuring Accruals

Selected information related to the restructuring accruals for the three months ended March 31, 2020 and 2019 is as follows:

Employee

Other

Total

    

Costs

Exit Costs

Restructuring

Balance at January 1, 2020

$

32

$

13

$

45

Net cash paid, principally severance and related benefits

 

(8)

 

(8)

Other, including foreign exchange translation

 

(2)

(1)

 

(3)

Balance at March 31, 2020

$

22

$

12

$

34

Employee

Other

Total

Costs

Exit Costs

Restructuring

Balance at January 1, 2019

$

47

$

22

$

69

Net cash paid, principally severance and related benefits

 

(13)

(2)

 

(15)

Other, including foreign exchange translation

 

(1)

 

(1)

Balance at March 31, 2019

$

34

$

19

$

53

When a decision is made to take restructuring actions, the Company manages and accounts for them programmatically apart from the on-going 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, 2020 and 2019, no major restructuring programs were in effect.

For the three months ended March 31, 2020 and 2019, the Company has paid severance and related benefits along with other exit costs that were associated with past restructuring actions. The Company expects that the majority of the

11

remaining cash expenditures related to the accrued employee and other exit costs will be paid out over the next several years.

7. Pension Benefit Plans

The components of the net periodic pension cost for the three months ended March 31, 2020 and 2019 are as follows:

U.S.

Non-U.S.

 

    

2020

    

2019

    

2020

    

2019

 

Service cost

$

3

$

3

$

3

$

3

Interest cost

 

12

 

15

 

7

 

8

Expected asset return

(21)

(22)

(12)

(12)

Amortization of actuarial loss

14

10

3

3

Net periodic pension cost

$

8

$

6

$

1

$

2

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 such factors 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.

The Company is currently under examination in various tax jurisdictions in which it operates, including Bolivia, Brazil, Canada, Colombia, France, Germany, Indonesia and Peru. The years under examination range from 2004 through 2018. 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 to the Company’s results of operations, financial position or cash flows.

On March 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. The CARES Act is an emergency economic stimulus package in response to the coronavirus outbreak that provides numerous tax provisions and other stimulus measures. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Some international jurisdictions in which the Company operates have also enacted legislation to provide economic stimulus in response to the coronavirus outbreak. The Company anticipates it may benefit from the ability to defer U.S. social security payroll tax that would otherwise be required in 2020, the acceleration of alternative minimum tax credit refunds, and potentially other provisions within the CARES Act. In addition, the Company may benefit from the deferral of certain non-U.S. tax payments to a future period. The Company expects the CARES Act and international legislation will not have a material impact on the Company’s condensed consolidated financial statements.

12

9. Debt

The following table summarizes the long-term debt of the Company:

March 31,

December 31,

March 31,

    

2020

    

2019

    

2019

Secured Credit Agreement:

Revolving Credit Facility:

Revolving Loans

$

817

$

$

Term Loans:

Term Loan A

1,477

1,477

Previous Secured Credit Agreement:

Revolving Credit Facility:

Revolving Loans

553

Term Loans:

Term Loan A

897

Other secured debt

330

333

504

Senior Notes:

6.75%, due 2020 (€500 million)

 

560

4.875%, due 2021 (€118 million at March 31, 2020 and December 31, 2019 and €330 million at March 31, 2019)

 

130

132

369

5.00%, due 2022

497

497

497

4.00%, due 2023

307

307

307

5.875%, due 2023

689

689

688

3.125%, due 2024 (€725 million)

813

824

824

6.375%, due 2025

296

295

296

5.375%, due 2025

297

297

298

2.875%, due 2025 (€500 million)

543

552

Finance leases

84

70

43

Other

 

13

11

18

Total long-term debt

 

6,293

 

5,484

5,854

Less amounts due within one year

 

178

49

34

Long-term debt

$

6,115

$

5,435

$

5,820

The Company presents debt issuance costs in the balance sheet as a deduction of the carrying amount of the related debt liability.

On June 25, 2019, certain of the Company’s subsidiaries entered into a new Senior Secured Credit Facility Agreement (as amended by that certain Amendment No. 1 to the Third Amended and Restated Credit Agreement and Syndicated Facility Agreement dated as of December 13, 2019, and as further amended by that certain Amendment No. 2 to the Third Amended and Restated Credit Agreement and Syndicated Facility Agreement dated as of December 19, 2019, the “Agreement”), which amended and restated the previous credit agreement (the “Previous Agreement”). The proceeds from the Agreement were used to repay all outstanding amounts under the Previous Agreement.

The Agreement provides for up to $3.0 billion of borrowings pursuant to term loans and revolving credit facilities. The term loans mature, and the revolving credit facilities terminate, in June 2024. At March 31, 2020, the Agreement includes a $300 million revolving credit facility, a $1.2 billion multicurrency revolving credit facility, and a $1.5 billion term loan A facility ($1,477 million net of debt issuance costs). At March 31, 2020, the Company had unused credit of $673 million available under the Agreement. The weighted average interest rate on borrowings outstanding under the Agreement at March 31, 2020 was 2.28%.

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

13

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 Total Leverage Ratio (the “Leverage Ratio”), that requires the Company not to exceed a ratio of 5.0x calculated by dividing consolidated total debt, less cash and cash equivalents, by Consolidated EBITDA, with such Leverage Ratio decreasing to (a) 4.75x for the quarter ending June 30, 2021 and (b) 4.50x for the quarter ending December 31, 2021 and thereafter, as defined and described in the Agreement. The maximum Leverage Ratio is subject to an increase of 0.5x for (i) any fiscal quarter during which certain qualifying acquisitions (as specified in the Agreement) are consummated and (ii) the following three fiscal quarters, provided that the Leverage Ratio shall not exceed 5.0x. 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 other customary 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, 2020, 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.

The Leverage Ratio also determines pricing under the Agreement. The interest rate on borrowings under the Agreement is, at the Company’s option, the Base Rate or the Eurocurrency Rate, as defined in the Agreement, plus an applicable margin. The applicable margin is linked to the Leverage Ratio. The margins range from 1.00% to 1.50