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, 2021

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, 2021 was 157,912,101.

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, 2020.

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,

2021

    

2020

    

 

Net sales

$

1,500

$

1,561

Cost of goods sold

 

(1,256)

 

(1,293)

Gross profit

244

268

Selling and administrative expense

(102)

(116)

Research, development and engineering expense

(18)

(16)

Interest expense, net

(51)

(53)

Equity earnings

18

15

Other expense, net

(156)

(17)

Earnings (loss) before income taxes

 

(65)

 

81

Provision for income taxes

(26)

(26)

Net earnings (loss)

 

(91)

 

55

Net earnings attributable to non-controlling interests

(6)

(5)

Net earnings (loss) attributable to the Company

$

(97)

$

50

Basic earnings per share:

Net earnings (loss) attributable to the Company

$

(0.62)

$

0.32

Weighted average shares outstanding (thousands)

157,571

156,081

Diluted earnings per share:

Net earnings (loss) attributable to the Company

$

(0.62)

$

0.32

Weighted average diluted shares outstanding (thousands)

157,571

157,684

See accompanying notes.

2

O-I GLASS, INC.

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Dollars in millions)

(Unaudited)

Three months ended

March 31,

    

2021

    

2020

    

 

Net earnings (loss)

$

(91)

$

55

Other comprehensive income (loss):

Foreign currency translation adjustments

(85)

(573)

Pension and other postretirement benefit adjustments, net of tax

20

31

Change in fair value of derivative instruments, net of tax

13

6

Other comprehensive loss

(52)

(536)

Total comprehensive income (loss)

(143)

(481)

Comprehensive (income) loss attributable to non-controlling interests

(2)

4

Comprehensive income (loss) attributable to the Company

$

(145)

$

(477)

See accompanying notes.

3

O-I GLASS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(Unaudited)

March 31,

December 31,

March 31,

2021

2020

2020

Assets

Current assets:

Cash and cash equivalents

$

742

$

563

$

891

Trade receivables, net of allowance of $32 million, $33 million, and $30 million at March 31, 2021, December 31, 2020 and March 31, 2020

 

714

 

623

 

767

Inventories

 

827

 

841

 

1,047

Prepaid expenses and other current assets

 

203

 

270

 

257

Total current assets

 

2,486

 

2,297

 

2,962

Property, plant and equipment, net

2,791

2,907

2,987

Goodwill

1,880

1,951

1,773

Intangibles, net

310

325

312

Other assets

1,358

1,402

1,470

Total assets

$

8,825

$

8,882

$

9,504

Liabilities and Share owners’ equity

Current liabilities:

Accounts payable

$

998

$

1,126

$

1,025

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

180

197

283

Other liabilities

524

575

516

Total current liabilities

 

1,702

 

1,898

 

1,824

Long-term debt

5,168

4,945

6,115

Paddock support agreement liability

625

471

471

Other long-term liabilities

1,068

1,167

1,018

Share owners' equity

262

401

76

Total liabilities and share owners’ equity

$

8,825

$

8,882

$

9,504

See accompanying notes.

4

O-I GLASS, INC.

CONDENSED CONSOLIDATED CASH FLOWS

(Dollars in millions)

(Unaudited)

Three months ended March 31,

    

2021

    

2020

 

 

Cash flows from operating activities:

Net earnings (loss)

$

(91)

$

55

Non-cash charges

Depreciation and amortization

 

115

126

Pension expense

 

8

9

Charge related to Paddock support agreement liability

 

154

Cash payments

Pension contributions

 

(18)

(13)

Cash paid for restructuring activities

 

(3)

(8)

Change in components of working capital

 

(229)

(461)

Other, net (a)

8

(23)

Cash utilized in operating activities

 

(56)

 

(315)

Cash flows from investing activities:

Cash payments for property, plant and equipment

 

(93)

(120)

Cash proceeds on disposal of other businesses and misc. assets

4

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

58

Deconsolidation of Paddock

(47)

Other

2

Cash utilized in investing activities

 

(31)

 

(165)

Cash flows from financing activities:

Changes in borrowings, net

290

859

Issuance of common stock and other

(2)

(2)

Dividends paid

(8)

Cash provided by financing activities

 

288

 

849

Effect of exchange rate fluctuations on cash

 

(22)

(29)

Increase in cash

 

179

 

340

Cash at beginning of period

 

563

551

Cash at end of period

$

742

$

891

(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

Historically, the Company had three reportable segments and three operating segments based on its geographic locations: the 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. On July 31, 2020, the Company completed the sale of its Australia and New Zealand (“ANZ”) businesses, which comprised the majority of its businesses in the Asia Pacific region (approximately 85% of net sales in that region for the full year 2019), to Visy Industries Holdings Pty Ltd. (“Visy”).  After the sale of the ANZ businesses, the remaining businesses in the Asia Pacific region do not meet the criteria of an individually reportable segment. For the three months ended March 31, 2020, the results of the Asia Pacific segment have been recast to reflect only the results of its ANZ businesses. For all historical periods discussed in this report, the sales and operating results of the other businesses that historically comprised the Asia Pacific segment, and that have been retained by the Company, have been reclassified to Other sales and Retained corporate costs and other, respectively. For asset reporting purposes, only the assets related to the ANZ businesses have been reported in the Asia Pacific segment, while the other businesses that historically comprised this segment and that have been retained by the Company have been reclassified to the Other assets line for all periods presented.

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, 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 ANZ businesses. 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, 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 (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, 2021 and 2020 regarding the Company’s reportable segments is as follows:

    

Three months ended March 31,

2021

 

2020

 

Net sales:

Americas

$

837

$

831

Europe

 

639

576

Asia Pacific

 

123

Reportable segment totals

 

1,476

 

1,530

Other

24

31

Net sales

$

1,500

$

1,561

6

Three months ended March 31,

    

2021

    

2020

 

Segment operating profit:

Americas

$

100

$

103

Europe

 

75

 

61

Asia Pacific

 

 

12

Reportable segment totals

 

175

 

176

Items excluded from segment operating profit:

Retained corporate costs and other

(35)

(28)

Charge related to Paddock support agreement liability

(154)

Charge for deconsolidation of Paddock

(14)

Interest expense, net

(51)

(53)

Earnings (loss) before income taxes

$

(65)

$

81

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

March 31,

December 31,

March 31,

    

2021

2020

2020

Total assets:

Americas

 

$

4,755

 

$

4,927

 

$

4,693

Europe

 

3,536

 

3,507

 

3,290

Asia Pacific

 

 

 

608

Reportable segment totals

 

8,291

 

8,434

 

8,591

Other

 

534

448

913

Consolidated totals

 

$

8,825

 

$

8,882

 

$

9,504

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, 2021 and March 31, 2020, 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.

Consistent with the disclosures in Note 1 related to the ANZ sale, Asia Pacific revenue for the three-month period ended March 31, 2020, has been recast to reflect only the revenue of the ANZ businesses. The other businesses that comprised the Asia Pacific segment and that have been retained by the Company have been reclassified to the Other sales line.

7

The following tables for the three months ended March 31, 2021 and 2020 disaggregate the Company’s revenue by customer end use:

Three months ended March 31, 2021

    

Americas

Europe

Asia Pacific

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

Three months ended March 31, 2020

    

Americas

Europe

Asia Pacific

Total

Alcoholic beverages (beer, wine, spirits)

 

$

508

$

411

$

96

$

1,015

Food and other

 

189

105

14

 

308

Non-alcoholic beverages

 

134

60

13

 

207

Reportable segment totals

$

831

$

576

$

123

$

1,530

Other

 

31

Net sales

 

$

1,561


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, 2021 and March 30, 2020, the Company reported $714 million and $767 million of accounts receivable, respectively, net of allowances of $32 million and $30 million, respectively. Changes in the allowance were not material for the three months ended March 31, 2021 and March 31, 2020.

4. Inventories

Major classes of inventory at March 31, 2021, December 31, 2020 and March 31, 2020 are as follows:

March 31,

December 31,

March 31,

    

2021

    

2020

    

2020

    

 

Finished goods

$

672

$

675

$

884

Raw materials

 

119

 

129

 

121

Operating supplies

 

36

 

37

 

42

$

827

$

841

$

1,047

8

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

An unrecognized gain of $10 million at March 31, 2021, an unrecognized gain of $9 million at December 31, 2020 and an unrecognized loss of $4 million at March 31, 2020, related to these cross-currency swaps, were included in Accumulated OCI, and will be reclassified into earnings within the next 12 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, 2021, an unrecognized loss of less than $1 million at December 31, 2020 and an unrecognized loss of $1 million at March 31, 2020 related to these interest rate swaps, were included in Accumulated OCI, and will be reclassified into earnings within the next 12 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.  

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.

9

Balance Sheet Classification

The following table shows the amount and classification (as noted above) of the Company’s derivatives at March 31, 2021, December 31, 2020 and March 31, 2020:

Fair Value of

Fair Value of

Hedge Assets

Hedge Liabilities

March 31,

December 31,

March 31,

March 31,

December 31,

March 31,

    

2021

    

2020

    

2020

    

2021

    

2020

    

2020

Derivatives designated as hedging instruments:

    

    

    

    

    

    

Interest rate swaps - fair value hedges (a)

13

17

11

Cash flow hedges of foreign exchange risk (b)

8

6

66

67

115

4

Interest rate swaps - cash flow hedges (c)

2

Net investment hedges (d)

2

1

5

39

52

Total derivatives accounted for as hedges

$

23

$

24

$

82

$

106

$

167

$

6

Derivatives not designated as hedges:

Foreign exchange derivative contracts (e)

5

1

10

3

3

5

Total derivatives

$

28

$

25

$

92

$

109

$

170

$

11

Current

$

18

$

13

$

30

$

9

$

15

$

6

Noncurrent

10

12

62

100

155

5

Total derivatives

$

28

$

25

$

92

$

109

$

170

$

11

(a) The notional amounts of the interest rate swaps designated as fair value hedges were €725 million at March 31, 2021, December 31, 2020 and March 31, 2020. The maximum maturity dates were in 2024 for all three periods.

(b) The notional amounts of the cash flow hedges of foreign exchange risk were $978 million at March 31, 2021, $978 million at December 31, 2020 and $1.424 billion at March 31, 2020. The maximum maturity dates were in 2023 for all three periods.

(c) The notional amounts of the interest rate swaps designated as cash flow hedges were $0 at March 31, 2021, $0 at December 31, 2020 and $105 million at March 31, 2020. Maximum maturity dates were in 2020 for March 31, 2020.

(d) The notional amounts of the net investment hedges were €311 million at March 31, 2021, €311 million at December 31, 2020 and €160 million at March 31, 2020. The maximum maturity dates were in 2027 for March 31, 2021 and December 31, 2020 and in 2020 for March 31, 2020.

(e) The notional amounts of the foreign exchange derivative contracts were $301 million, $247 million and $306 million at March 31, 2021, December 31, 2020 and March 31, 2020, respectively. The maximum maturity dates were in 2021 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:

 

2021

2020

2021

2020

Cash Flow Hedges

    

    

  

  

    

    

Cash flow hedges of foreign exchange risk (a)

$

48

$

66

$

49

$

60

Net Investment Hedges

Net Investment Hedges (b)

15

4

1

2

$

63

$

70

$

50

$

62

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

Three months ended March 31,

Derivatives not designated as hedges:

 

2021

2020

Foreign exchange derivative contracts

    

$

10

    

$

12

    

    

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

6. Restructuring Accruals

Selected information related to the restructuring accruals for the three months ended March 31, 2021 and 2020 is as follows:

Employee

Other

Total

    

Costs

    

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

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

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, 2021 and 2020, no major restructuring programs were in effect.

For the three months ended March 31, 2021 and 2020, 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 remaining cash expenditures related to the accrued employee and other costs will be paid out over the next several years.

11

7. Pension Benefit Plans

The components of the net periodic pension cost for the three months ended March 31, 2021 and 2020 are as follows:

U.S.

Non-U.S.

 

    

2021

    

2020

    

2021

    

2020

 

Service cost

$

3

$

3

$

3

$

3

Interest cost

 

10

 

12

 

5

 

7

Expected asset return

(21)

(21)

(11)

(12)

Amortization of actuarial loss

16

14

3

3

Net periodic pension cost

$

8

$

8

$

$

1

The components of pension expense, other than the service cost component, are included in Other 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 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, including Bolivia, Brazil, Canada, Colombia, France, Germany, Indonesia, Mexico and Peru. The years under examination range from 2004 through 2019. 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 results of operations, financial position or cash flows.

12

9. Debt

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

March 31,

December 31,

March 31,

    

2021

    

2020

    

2020

Secured Credit Agreement:

Revolving Credit Facility:

Revolving Loans

$

292

$

$

817

Term Loans:

Term Loan A

1,068

1,067

1,477

Other secured debt

110

99

330

Senior Notes:

4.875%, due 2021 (€118 million at March 31, 2020)

 

130

5.00%, due 2022

497

4.00%, due 2023

308

307

307

5.875%, due 2023

692

692

689

3.125%, due 2024 (€725 million)

866

914

813

6.375%, due 2025

296

296

296

5.375%, due 2025

298

298

297

2.875%, due 2025 (€500 million)

579

607

543

6.625%, due 2027

692

692

Finance leases

102

108

84

Other

 

6

7

13

Total long-term debt

 

5,309

 

5,087

6,293

Less amounts due within one year

 

141

142

178

Long-term debt

$

5,168

$

4,945

$

6,115

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 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, 2021, 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 ($1,068 million outstanding balance at March 31, 2021, net of debt issuance costs). At March 31, 2021, the Company had unused credit of $1,194 million available under the Agreement. The weighted average interest rate on borrowings outstanding under the Agreement at March 31, 2021 was 1.59%.

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 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.

13

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, 2021, 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% for Eurocurrency Loans and from 0.00% to 0.50% for Base Rate Loans. In addition, a commitment fee is payable on the unused revolving credit facility commitments ranging from 0.20% to 0.30% per annum linked to the Leverage Ratio.

Obligations under the Agreement are secured by substantially all of the assets, excluding real estate and certain other excluded assets, of certain of the Company’s domestic subsidiaries and certain foreign subsidiaries. Such obligations are also secured by a pledge of intercompany debt and equity investments in certain of the Company’s domestic subsidiaries and, in the case of foreign obligations, of stock of certain foreign subsidiaries. All obligations under the Agreement are guaranteed by certain domestic subsidiaries of the Company, and certain foreign obligations under the Agreement are guaranteed by certain foreign subsidiaries of the Company.

In May 2020, the Company issued $700 million aggregate principal amount of senior notes. The senior notes bear interest at a rate of 6.625% per annum and mature on May 13, 2027. The senior notes were issued via a private placement and are guaranteed by certain of the Company’s domestic subsidiaries. The net proceeds, after deducting debt issuance costs, totaled approximately $690 million and were used to redeem the remaining $130 million aggregate principal amount of the Company’s outstanding 4.875% senior notes due 2021, approximately $419 million aggregate principal amount of the Company’s outstanding 5.00% senior notes due 2022 and approximately $105 million of other secured borrowings. The Company recorded approximately $38 million of additional interest charges for note repurchase premiums and write-off of unamortized finance fees related to these redemptions.

In August 2020, the Company redeemed the remaining $81 million aggregate principal amount of the Company’s outstanding 5.00% senior notes due 2022. The Company recorded approximately $6 million of additional interest charges for note repurchase premiums and write-off of unamortized finance fees related to this redemption.

In order to maintain a capital structure containing appropriate amounts of fixed and floating-rate debt, the Company has entered into a series of interest rate swap agreements. These interest rate swap agreements were accounted for as either fair value hedges or cash flow hedges (see Note 5 for more information).

The Company assesses its capital raising and refinancing needs on an ongoing basis and may enter into additional credit facilities and seek to issue equity and/or debt securities in the domestic and international capital markets if market conditions are favorable. Also, depending on market conditions, the Company may elect to repurchase portions of its debt securities in the open market.

The carrying amounts reported for certain long-term debt obligations subject to frequently redetermined interest rates approximate fair value. Fair values for the Company’s significant fixed rate debt obligations are based on

14

published market quotations, and are classified as Level 1 in the fair value hierarchy. Fair values at March 31, 2021 of the Company’s significant fixed rate debt obligations are as follows: