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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

September 30, 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 September 30, 2021 was 156,827,223.

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

Nine months ended

September 30,

September 30,

2021

    

2020

    

2021

    

2020

    

 

Net sales

$

1,609

$

1,616

$

4,770

$

4,595

Cost of goods sold

 

(1,307)

 

(1,339)

 

(3,916)

 

(3,887)

Gross profit

 

302

277

854

708

Selling and administrative expense

 

(108)

(95)

(325)

(308)

Research, development and engineering expense

 

(19)

(16)

(57)

(45)

Interest expense, net

 

(50)

(61)

(153)

(212)

Equity earnings

 

23

21

64

49

Other income (expense), net

 

(21)

250

(123)

147

Earnings from continuing operations before income taxes

 

127

 

376

 

260

 

339

Provision for income taxes

 

(43)

(41)

(144)

(50)

Earnings from continuing operations

 

84

 

335

 

116

 

289

Gain from discontinued operations

 

7

7

Net earnings

 

91

 

335

 

123

 

289

Net earnings attributable to non-controlling interests

 

(6)

(7)

(17)

(11)

Net earnings attributable to the Company

$

85

$

328

$

106

$

278

Amounts attributable to the Company:

Earnings from continuing operations

$

78

$

328

$

99

$

278

Gain from discontinued operations

 

7

7

 

Net earnings

$

85

$

328

$

106

$

278

Basic earnings per share:

Earnings from continuing operations attributable to the Company

$

0.49

$

2.09

$

0.62

$

1.77

Gain from discontinued operations

 

0.05

 

0.05

 

Net earnings

$

0.54

$

2.09

$

0.67

$

1.77

Weighted average shares outstanding (thousands)

156,825

157,073

157,430

156,650

Diluted earnings per share:

Earnings from continuing operations attributable to the Company

$

0.48

$

2.06

$

0.61

$

1.76

Gain from discontinued operations

 

0.05

 

0.05

 

Net earnings

$

0.53

$

2.06

$

0.66

$

1.76

Weighted average diluted shares outstanding (thousands)

160,511

159,299

160,473

158,438

See accompanying notes.

2

O-I GLASS, INC.

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Dollars in millions)

(Unaudited)

Three months ended

Nine months ended

September 30,

September 30,

    

2021

    

2020

    

2021

    

2020

    

 

Net earnings

$

91

$

335

$

123

$

289

Other comprehensive income (loss):

Foreign currency translation adjustments

 

(110)

(148)

(81)

(666)

Pension and other postretirement benefit adjustments, net of tax

 

78

42

115

92

Change in fair value of derivative instruments, net of tax

 

13

(11)

26

(18)

Other comprehensive income (loss)

(19)

(117)

60

(592)

Total comprehensive income (loss)

72

218

183

(303)

Comprehensive income attributable to non-controlling interests

 

(5)

(7)

(3)

(1)

Comprehensive income (loss) attributable to the Company

$

67

$

211

$

180

$

(304)

See accompanying notes.

3

O-I GLASS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(Unaudited)

September 30,

December 31,

September 30,

2021

2020

2020

Assets

Current assets:

Cash and cash equivalents

$

628

$

563

$

606

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

 

793

 

623

 

724

Inventories

 

808

 

841

 

782

Prepaid expenses and other current assets

 

213

 

270

 

272

Total current assets

 

2,442

 

2,297

 

2,384

Property, plant and equipment, net

2,785

2,907

2,675

Goodwill

1,879

1,951

1,847

Intangibles, net

294

325

311

Other assets

1,366

1,402

1,407

Total assets

$

8,766

$

8,882

$

8,624

Liabilities and Share owners’ equity

Current liabilities:

Accounts payable

$

1,062

$

1,126

$

910

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

79

197

212

Other liabilities

597

575

575

Total current liabilities

 

1,738

 

1,898

 

1,697

Long-term debt

4,853

4,945

5,163

Paddock support agreement liability

625

471

471

Other long-term liabilities

980

1,167

1,028

Share owners' equity

570

401

265

Total liabilities and share owners’ equity

$

8,766

$

8,882

$

8,624

See accompanying notes.

4

O-I GLASS, INC.

CONDENSED CONSOLIDATED CASH FLOWS

(Dollars in millions)

(Unaudited)

Nine months ended September 30,

    

2021

    

2020

 

 

Cash flows from operating activities:

Net earnings

$

123

$

289

Gain from discontinued operations

 

(7)

 

Non-cash charges

Depreciation and amortization

 

349

363

Pension expense

 

24

30

Charge related to Paddock support agreement liability

154

Brazil indirect tax credit

(69)

Restructuring, asset impairment and related charges

 

20

72

Pension settlement charges

5

8

Gain on sale of ANZ business

(280)

Cash payments

Pension contributions

 

(33)

(32)

Cash paid for restructuring activities

 

(14)

(32)

Change in components of working capital

 

(139)

(402)

Other, net (a)

36

112

Cash provided by continuing operating activities

 

449

 

128

Cash provided by discontinued operating activities

 

7

 

Cash provided by operating activities

 

456

 

128

Cash flows from investing activities:

Cash payments for property, plant and equipment

 

(268)

(246)

Cash proceeds on disposal of other businesses and misc. assets

8

2

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

58

441

Deconsolidation of Paddock

(47)

Other

1

Cash provided by (utilized in) investing activities

 

(202)

 

151

Cash flows from financing activities:

Changes in borrowings, net

(119)

(300)

Payment of finance fees

(50)

Shares repurchased

(30)

Dividends paid

(8)

Net cash payments for hedging activity

(10)

(8)

Sale leaseback proceeds in conjunction with ANZ sale

155

Distributions to non-controlling interests

(10)

(5)

Other, net

(2)

(3)

Cash utilized in financing activities

 

(171)

 

(219)

Effect of exchange rate fluctuations on cash

 

(18)

(5)

Change in cash

 

65

 

55

Cash at beginning of period

 

563

551

Cash at end of period

$

628

$

606

(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 and nine months ended September 30, 2020, the results of the Asia Pacific segment 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 and nine months ended September 30, 2021 and 2020 regarding the Company’s reportable segments is as follows:

    

Three months ended September 30,

Nine months ended September 30,

2021

    

2020

    

2021

 

2020

 

Net sales:

Americas

$

925

$

887

$

2,652

$

2,442

Europe

 

655

 

644

 

2,039

1,775

Asia Pacific

 

 

52

 

281

Reportable segment totals

 

1,580

 

1,583

 

4,691

 

4,498

Other

 

29

33

79

97

Net sales

$

1,609

$

1,616

$

4,770

$

4,595

6

Three months ended September 30,

Nine months ended September 30,

    

2021

    

2020

    

2021

    

2020

 

Segment operating profit:

Americas

$

133

$

113

$

357

$

268

Europe

 

110

 

88

 

293

 

191

Asia Pacific

 

 

3

 

 

19

Reportable segment totals

 

243

 

204

 

650

 

478

Items excluded from segment operating profit:

Retained corporate costs and other

(49)

(35)

(126)

(98)

Gain on sale of ANZ businesses

280

280

Brazil indirect tax credit

69

Restructuring, asset impairment and other charges

 

(12)

(9)

(21)

(80)

Charge related to Paddock support agreement liability

(154)

Charge for deconsolidation of Paddock

 

(14)

Pension settlement charges

 

(5)

(5)

(8)

Strategic transaction costs

(3)

(7)

Interest expense, net

 

(50)

(61)

(153)

(212)

Earnings from continuing operations before income taxes

$

127

$

376

$

260

$

339

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

September 30,

December 31,

September 30,

    

2021

2020

2020

Total assets:

Americas

 

$

4,925

 

$

4,927

 

$

4,663

Europe

 

3,457

 

3,507

 

3,307

Reportable segment totals

 

8,382

 

8,434

 

7,970

Other

 

384

448

654

Consolidated totals

 

$

8,766

 

$

8,882

 

$

8,624

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- and nine-month periods ended September 30, 2021 and September 30, 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- and nine-month periods ended September 30, 2020, 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 September 30, 2021 and 2020 disaggregate the Company’s revenue by customer end use:

Three months ended September 30, 2021

    

Americas

Europe

Asia Pacific

Total

Alcoholic beverages (beer, wine, spirits)

 

$

561

 

$

467

 

$

$

1,028

Food and other

 

215

 

124

 

 

339

Non-alcoholic beverages

 

149

 

64

 

 

213

Reportable segment totals

$

925

$

655

$

$

1,580

Other

 

29

Net sales

 

$

1,609

Three months ended September 30, 2020

    

Americas

Europe

Asia Pacific

Total

Alcoholic beverages (beer, wine, spirits)

 

$

537

$

452

$

40

$

1,029

Food and other

 

222

138

6

 

366

Non-alcoholic beverages

 

128

54

6

 

188

Reportable segment totals

$

887

$

644

$

52

$

1,583

Other

 

33

Net sales

 

$

1,616

The following tables for the nine months ended September 30, 2021 and 2020 disaggregate the Company’s revenue by customer end use:

Nine months ended September 30, 2021

    

Americas

Europe

Asia Pacific

Total

Alcoholic beverages (beer, wine, spirits)

 

$

1,610

 

$

1,507

 

$

$

3,117

Food and other

 

627

 

366

 

 

993

Non-alcoholic beverages

 

415

 

166

 

 

581

Reportable segment totals

$

2,652

$

2,039

$

$

4,691

Other

 

79

Net sales

 

$

4,770

Nine months ended September 30, 2020

    

Americas

Europe

Asia Pacific

Total

Alcoholic beverages (beer, wine, spirits)

 

$

1,471

$

1,258

$

217

$

2,946

Food and other

 

609

360

38

 

1,007

Non-alcoholic beverages

 

362

157

26

 

545

Reportable segment totals

$

2,442

$

1,775

$

281

$

4,498

Other

 

97

Net sales

 

$

4,595


8

3. Credit Losses

The Company is exposed to credit losses primarily through its sales of glass containers to customers. The Company’s trade receivables from customers are due within one year or less. The Company assesses each customer’s ability to pay for the glass containers it sells to them by conducting a credit review. The credit review considers the expected billing exposure and timing for payment and the customer’s established credit rating or the Company’s assessment of the customer’s creditworthiness, based on an analysis of their financial statements when a credit rating is not available. The Company also considers contract terms and conditions, country and political risk, and business strategy in its evaluation. A credit limit is established for each customer based on the outcome of this review. The Company may require collateralized asset support or a prepayment to mitigate credit risk. The Company monitors its ongoing credit exposure through the active review of customer balances against contract terms and due dates, including timely account reconciliation, dispute resolution and payment confirmation. The Company may employ collection agencies and legal counsel to pursue the recovery of defaulted receivables.

At September 30, 2021 and September 30, 2020, the Company reported $793 million and $724 million of accounts receivable, respectively, net of allowances of $31 million and $33 million, respectively. Changes in the allowance were not material for each of the three and nine months ended September 30, 2021 and September 30, 2020.

4. Inventories

Major classes of inventory at September 30, 2021, December 31, 2020 and September 30, 2020 are as follows:

September 30,

December 31,

September 30,

    

2021

    

2020

    

2020

Finished goods

$

651

$

675

$

625

Raw materials

 

120

 

129

 

121

Operating supplies

 

37

 

37

 

36

$

808

$

841

$

782

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 $9 million at September 30, 2021, an unrecognized gain of $9 million at December 31, 2020 and an unrecognized gain of $9 million at September 30, 2020, related to these cross-currency swaps, were included in Accumulated OCI, and will be reclassified into earnings within the next 12 months.

9

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 $0 at September 30, 2021, an unrecognized loss of less than $1 million at December 31, 2020 and an unrecognized loss of less than $1 million at September 30, 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.

10

Balance Sheet Classification

The following table shows the amount and classification (as noted above) of the Company’s derivatives at September 30, 2021, December 31, 2020 and September 30, 2020: