Amcor 10-Q 2021-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ 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 001-38932

AMCOR PLC

(Exact name of Registrant as specified in its charter)

83 Tower Road North

Warmley, Bristol BS30 8XP

United Kingdom

(Address of principal executive offices)

Registrant’s telephone number, including area code: +44 117 9753200

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

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. (Check one):

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 ☒

As of November 2, 2021, the registrant had 1,533,168,898 ordinary shares, $0.01 par value, outstanding.

Amcor plc

Quarterly Report on Form 10-Q

Table of Contents

Cautionary Statement Regarding Forward-Looking Statements

Unless otherwise indicated, references to "Amcor," the "Company," "we," "our," and "us" in this Quarterly Report on Form 10-Q refer to Amcor plc and its consolidated subsidiaries.

This Quarterly Report on Form 10-Q contains certain statements that are "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identified with words like "believe," "expect," "target," "project," "may," "could," "would," "approximately," "possible," "will," "should," "intend," "plan," "anticipate," "estimate," "potential," "outlook," or "continue," the negative of these words, other terms of similar meaning, or the use of future dates. Such statements are based on the current expectations of the management of Amcor and are qualified by the inherent risks and uncertainties surrounding future expectations generally. Actual results could differ materially from those currently anticipated due to a number of risks and uncertainties. None of Amcor or any of its respective directors, executive officers, or advisors, provide any representation, assurance, or guarantee that the occurrence of the events expressed or implied in any forward-looking statements will actually occur. Risks and uncertainties that could cause actual results to differ from expectations include, but are not limited to:

• changes in consumer demand patterns and customer requirements in numerous industries;

• the loss of key customers, a reduction in their production requirements, or consolidation among key customers;

• significant competition in the industries and regions in which we operate;

• the inability to expand our current business effectively through either organic growth, including by product innovation, or acquisitions;

• the failure to successfully integrate acquisitions in the expected time frame;

• challenges to or the loss of our intellectual property rights;

• adverse impacts from the ongoing 2019 Novel Coronavirus ("COVID-19") pandemic or other similar outbreaks on Amcor and its customers, suppliers, employees, and the geographic markets in which Amcor and its customers operate;

• challenging current and future global economic conditions;

• impact of operating internationally;

• price fluctuations or shortages in the availability of raw materials, energy, and other inputs, which could adversely affect our business;

• production, supply, and other commercial risks, including counterparty credit risks, which may be exacerbated in times of economic downturn;

• a failure or disruption in our information technology systems;

• an inability to attract and retain key personnel;

• costs and liabilities related to current and future environmental and health and safety laws and regulations;

• labor disputes;

• the possibility that the phase out of the London Interbank Offered Rate ("LIBOR") causes our interest expense to increase;

• foreign exchange rate risk;

• an increase in interest rates;

• a significant increase in our indebtedness or a downgrade in our credit rating that could increase our borrowing costs and negatively affect our financial condition and results of operations;

• a failure to hedge effectively against adverse fluctuations in interest rates and foreign exchange rates;

• a significant write-down of goodwill and/or other intangible assets;

• our need to maintain an effective system of internal control over financial reporting;

• an inability of our insurance policies, including our use of a captive insurance company, to provide adequate protection against all of the risks we face;

• litigation, including product liability claims, or regulatory developments;

• increasing scrutiny and changing expectations with respect to our Environmental, Social, and Governance ("ESG") policies resulting in additional costs or exposure to additional risks;

• changing government regulations in environmental, health, and safety matters;

• changes in tax laws or changes in our geographic mix of earnings; and

• our ability to develop and successfully introduce new products and to develop, acquire, and retain intellectual property rights.

These risks and uncertainties are supplemented by those identified from time to time in our filings with the Securities and Exchange Commission, including without limitation, those described under Part I, "Item 1A - Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021. You can obtain copies of Amcor’s filings with the SEC for free at the SEC’s website (www.sec.gov). Forward-looking statements included herein are made only as of the date hereof and Amcor does not undertake any obligation to update any forward-looking statements, or any other information in this communication, as a result of new information, future developments or otherwise, or to correct any inaccuracies or omissions in them which

become apparent, except as expressly required by law. All forward-looking statements in this communication are qualified in their entirety by this cautionary statement.

Part I - Financial Information

Amcor plc and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

Amcor plc and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

Amcor plc and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

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Management’s Discussion and Analysis ("MD&A") should be read in conjunction with the Financial Statements and Notes to Condensed Consolidated Financial Statements. Throughout the MD&A, amounts and percentages may not recalculate due to rounding.

Summary of Financial Results

Overview

Amcor is a global leader in developing and producing responsible packaging for food, beverage, pharmaceutical, medical, home and personal-care, and other products. We work with leading companies around the world to protect their products and the people who rely on them, differentiate brands, and improve supply chains through a range of flexible and rigid packaging, specialty cartons, closures, and services. We are focused on making packaging that is increasingly light-weighted, recyclable and reusable, and made using an increasing amount of recycled content. During fiscal year 2021, approximately 46,000 Amcor employees generated $12.9 billion in sales from operations that spanned approximately 225 locations in over 40 countries.

Significant Items Affecting the Periods Presented

Impact of COVID-19

The ongoing 2019 Novel Coronavirus ("COVID-19") pandemic has resulted in a period of historic uncertainty and challenges with the extent and severity of the pandemic continuing to vary among the various regions in which we operate. Our business is almost entirely exposed to end markets which have demonstrated the same resilience experienced through past economic cycles. Our operations have been largely recognized as 'essential' by governments and authorities around the world given the role we play in the supply chains for critical food and healthcare products. Our scale and global footprint has enabled us to collaborate with customers and suppliers to navigate changes in demand and continue to service our customers. In dealing with the exceptional challenges posed by COVID-19, we have established three guiding principles focusing on the health and safety of our employees, keeping our operations running, and contributing to relief efforts in our communities.

Health and Safety

Our commitment to the health and safety of our employees remains our first priority. Our rigorous precautionary measures include global and regional response teams that maintain contact with authorities and experts to actively manage the situation, restrictions on company travel, quarantine protocols for employees who may have had exposure or have symptoms, frequent disinfecting of our locations, and other measures designed to help protect employees, customers, and suppliers. We expect to continue to evaluate our response and related precautions until the COVID-19 pandemic has been resolved as a public health crisis.

Operations

To support our business partners, we have instituted business continuity plans in each of our operations and offices globally which address infection prevention measures, incident response, return to work protocols, and supply chain risks. We have experienced minimal disruptions to our operations to date as we have largely been deemed as providing essential services. Our facilities have largely been exempt from government mandated closure orders and while governmental measures may be modified, we expect that our facilities will remain operational given the essential products we supply. However, despite our best efforts to contain the impact in our facilities, it remains possible that significant disruptions could occur as a result of the pandemic, including temporary closures of our facilities.

Contributions to Our Communities

To support our local communities, we launched a global program to help mitigate the impact of COVID-19 by donating food and healthcare packaging products and by funding local community initiatives to improve access to healthcare, education or food, and other essential products.

Looking Ahead

We continue to believe we are well-positioned to meet the challenges of the ongoing COVID-19 pandemic. However, we cannot reasonably estimate the duration and severity of this pandemic or its ultimate impact on the global economy and our operations and financial results. Globally, many governments continue to place restrictions on their citizens in reaction to the ongoing pandemic and vaccination rates are not at a level in many regions to prevent further spread of COVID-19. The ultimate near-term impact of the pandemic on our business will depend on the extent and nature of any future disruptions across the supply chain, the duration of social distancing measures and other government imposed restrictions, as well as the nature and pace of macroeconomic recovery in key global economies.

Raw Material and Supply Chain Trends

During the first quarter of fiscal 2022, we continued to experience supply shortages and price volatility of certain resins and raw materials in both of our reportable segments as a result of dynamics that first materialized in the second half of fiscal 2021. While our teams have executed well through the unprecedented supply challenges to meet customer requirements, the increased disruptions did result in an inability to fulfill our complete order book in the first quarter. The underlying causes for the volatility can be attributed to a variety of factors, including the ongoing impacts of the COVID-19 pandemic resulting in labor shortages and transportation constraints, energy shortages and weather disruptions impacting raw material supply in certain regions. We continue to work closely with our suppliers and customers, leveraging our global capabilities and expertise to work through supply and other resulting issues to date. We anticipate supplies of certain raw materials will continue to be tight through the first half of fiscal 2022 as supply channels recover. We expect supplies to gradually improve through the balance of our fiscal year as raw material supply increases and transportation networks improve, barring further significant impacts to supply and transportation channels due to factors such as COVID-19, adverse weather events, or labor shortages.

South Africa Fire

On July 13, 2021, our Durban, South Africa, manufacturing facility was destroyed by fire associated with general civil unrest. The facility employed 350 individuals and no employees were injured as the facility had been closed in advance of the disturbance. In the first quarter of fiscal 2022, we recorded $43 million related to inventory and property and equipment losses from the fire and other related expenses. We have insurance for the majority of property and other losses from the fire and have recorded an insurance receivable of $20 million for incurred losses where reimbursement is deemed probable. While we expect to recover additional insurance proceeds, the timing and extent of recovery is currently unknown. No further material expenses related to this event are expected.

2019 Bemis Integration Plan

In connection with the acquisition of Bemis, we initiated restructuring activities in the fourth quarter of fiscal year 2019 aimed at integrating and optimizing the combined organization. As previously announced, we continue to target realizing at least $180 million of pre-tax synergies driven by procurement, supply chain, and general and administrative savings by the end of fiscal year 2022.

Our total 2019 Bemis Integration Plan pre-tax integration costs are expected to be approximately $230 million to $240 million. The total 2019 Bemis Integration Plan costs include approximately $190 million to $200 million of restructuring and related expenses, net, and $40 million of general integration expenses. We estimate that net cash expenditures including disposal proceeds will be approximately $160 million to $170 million, of which $40 million relates to general integration expense. As of September 30, 2021, we have incurred $137 million in employee related expenses, $39 million in fixed asset related expenses, $29 million in other restructuring and $29 million in restructuring related expenses, partially offset by a gain on disposal of a business of $51 million. The three months ended September 30, 2021 resulted in net outflows of $14 million, of which $12 million were payments related to restructuring and related expenditures. Cash payments of approximately $65 million to $70 million are expected for the balance of the fiscal year for restructuring and related expenses. The 2019 Bemis Integration Plan relates to the Flexibles segment and Corporate and is expected to be substantially completed by the end of fiscal year 2022.

Restructuring related costs are directly attributable to restructuring activities; however, they do not qualify for special accounting treatment as exit or disposal activities. General integration costs are not linked to restructuring. We believe the disclosure of restructuring related costs provides more information on the total cost of the 2019 Bemis Integration Plan. The restructuring related costs relate primarily to the closure of facilities and include costs to replace graphics, train new employees on relocated equipment and anticipated losses on sale of closed facilities.

Equity Method Investment - AMVIG Holdings Limited ("AMVIG")

We sold our equity method investment in AMVIG on September 30, 2020, realizing a net gain of $15 million, which was recorded in equity in income of affiliated companies, net of tax in the unaudited condensed consolidated statements of income.

Highly Inflationary Accounting

We have subsidiaries in Argentina that historically had a functional currency of the Argentine Peso. As of June 30, 2018, the Argentine economy has been designated as highly inflationary for accounting purposes. Accordingly, beginning July 1, 2018, we began reporting the financial results of our Argentine subsidiaries with a functional currency of the Argentine Peso at the functional currency of the parent, which is the U.S. dollar. Highly inflationary accounting in the three months ended September 30, 2021 and 2020 resulted in a negative impact of $2 million and $4 million, respectively, in foreign currency transaction losses that was reflected in the unaudited condensed consolidated statements of income.

Results of Operations - Three Months Ended September 30, 2021

Consolidated Results of Operations

Net sales increased by $323 million, or approximately 10%, to $3,420 million for the three months ended September 30, 2021, from $3,097 million for the three months ended September 30, 2020. Excluding the impact of disposed operations of $22 million, or (0.7%), positive currency impacts of $32 million, or 1.0% and pass-through of raw material costs of $285 million, or 9.2%, the increase in net sales for the three months ended September 30, 2021 was $28 million or 0.9%, driven by favorable price mix of 1.4% and unfavorable volumes of (0.5%).

Net income attributable to Amcor plc increased by $4 million, or 2%, to $202 million for the three months ended September 30, 2021, from $198 million for the three months ended September 30, 2020 mainly as a result of lower restructuring costs of $15 million, lower selling, general, and administrative expenses of $16 million, partially offset by property and related business losses of $28 million primarily associated with the destruction of our Durban, South Africa, facility during general civil unrest in July 2021.

Diluted earnings per share ("Diluted EPS") increased to $0.131, or by 4%, for the three months ended September 30, 2021, from $0.126 for the three months ended September 30, 2020, with the net income attributable to ordinary shareholders of Amcor plc increasing by 2% and the diluted weighted average number of shares outstanding decreasing 2% for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The decrease in the diluted weighted average number of shares outstanding was due to repurchase of shares under announced share buyback programs.

Segment Results of Operations

Flexibles Segment

The Flexibles reportable segment develops and supplies flexible packaging globally.

Net sales including intersegment sales increased by $234 million, or 9.7%, to $2,634 million for the three months ended September 30, 2021, from $2,400 million for the three months ended September 30, 2020. Excluding the impact of disposed operations of $22 million, or (0.9%), positive currency impacts of $28 million, or 1.2%, and pass-through of raw material costs of $210 million, or 8.7%, the increase in net sales including intersegment sales for the three months ended September 30, 2021, was $17 million, or 0.6%, driven by favorable price/mix of 1.7% and unfavorable volumes of (1.1%).

Adjusted EBIT increased by $27 million, or 8.5%, to $339 million for the three months ended September 30, 2021, from $312 million for the three months ended September 30, 2020. Excluding the impact of disposed operations of $1 million, or (0.3%), positive currency impacts of $2 million, or 0.7%, the increase in Adjusted EBIT for the three months ended September 30, 2021, was $26 million, or 8.1%, driven by plant cost improvements of 10.3%, favorable selling, general, and administrative ("SG&A"), and other cost impacts of 0.9%, partially offset by unfavorable price/mix of (1.3%), and unfavorable volumes of (1.8%).

Rigid Packaging Segment

The Rigid Packaging reportable segment manufactures rigid packaging containers and related products.

Net sales increased by $88 million, or 12.6%, to $786 million for the three months ended September 30, 2021, from $698 million for the three months ended September 30, 2020. Excluding positive currency impacts of $3 million, or 0.4% and pass-through of raw material costs of $75 million, or 10.7%, the increase in net sales for the three months ended September 30, 2021 was $10 million, or 1.5%, driven by favorable volumes of 1.4%, and favorable price/mix of 0.1%.

Adjusted EBIT decreased by $10 million, or 14.2%, to $62 million for the three months ended September 30, 2021, from $72 million for the three months ended September 30, 2020. Excluding positive currency impacts of $1 million, or 0.8%, the decrease in Adjusted EBIT for the three months ended September 30, 2021 was $11 million, or (15.0%), driven by favorable price/mix of 6.4%, unfavorable plant costs/volume impacts of (20.3%), and unfavorable SG&A and other costs of (1.1%).

Consolidated Gross Profit

Gross profit decreased by $4 million, or 0.6%, to $650 million for the three months ended September 30, 2021, from $654 million for the three months ended September 30, 2020. The decrease was primarily driven by timing of passing through higher raw material and related costs.

Consolidated Selling, General, and Administrative ("SG&A") Expenses

SG&A expenses decreased by $16 million, or 4.9%, to $313 million for the three months ended September 30, 2021, from $329 million for the three months ended September 30, 2020. The decrease was primarily due to lower Bemis integration costs, restructuring benefits, and other savings initiatives.

Consolidated Research and Development Expenses

Research and development expenses decreased by $1 million, or 3.8%, to $25 million for the three months ended September 30, 2021, from $26 million for the three months ended September 30, 2020.

Consolidated Restructuring and Related Expenses, Net

Restructuring and related expenses, net, decreased by $15 million, or 65.2%, to 8 million for the three months ended September 30, 2021, from $23 million for the three months ended September 30, 2020. The decrease was primarily driven by lower restructuring costs in the Rigid Packaging reporting segment following the completion of the Rigid Packaging Restructuring Plan in June 2021, as well as lower restructuring costs in the Flexibles reporting segment.

Consolidated Other Expenses, Net

Other expenses, net increased by $8 million to $8 million for the three months ended September 30, 2021, from $0 million for the three months ended September 30, 2020, driven by property and related business losses in the Flexibles reportable segment primarily associated with the destruction of our Durban, South Africa, facility during general civil unrest in July 2021 that were partially offset by individually immaterial items, including foreign exchange gains.

Consolidated Interest Expense

Interest expense was $40 million for the three months ended September 30, 2021, in line with the interest expense of $40 million for the three months ended September 30, 2020.

Consolidated Income Tax Expense

The provision for income taxes for the three months ended September 30, 2021 and 2020 is based on our estimated annual effective tax rate for the respective fiscal years before income taxes and equity in income of affiliated companies and adjusted for specific items that are required to be recognized in the period in which they are incurred.

The effective tax rate for the three months ended September 30, 2021 decreased by 1.5 percentage points compared to the three months ended September 30, 2020 from 25.2% to 23.7%, primarily attributed to the lower tax benefits on integration and restructuring costs in the prior period.

Equity in Income of Affiliated Companies, Net of Tax

Equity in income of affiliated companies, net of tax decreased by $19 million for the three months ended September 30, 2021 due to the sale of the equity investment in AMVIG on September 30, 2020. For further information, refer to Note 14, "Disposals."

Presentation of Non-GAAP Information

This Quarterly Report on Form 10-Q refers to non-GAAP financial measures: adjusted earnings before interest and taxes ("Adjusted EBIT"), Adjusted net income, and net debt. These non-GAAP financial measures adjust for factors that are unusual or unpredictable. These measures exclude the impact of significant tax reforms, certain amounts related to the effect of changes in currency exchange rates, acquisitions, and restructuring, including employee-related costs, equipment relocation costs, accelerated depreciation, and the write-down of equipment. These measures also exclude gains or losses on sales of significant property and divestitures, significant property impairments, net of insurance recovery, certain litigation matters, and certain acquisition-related expenses, including transaction expenses, due diligence expenses, professional and legal fees, purchase accounting adjustments for inventory, order backlog, intangible amortization, and changes in the fair value of deferred acquisition payments.

This adjusted information should not be construed as an alternative to results determined in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). We use the non-GAAP measures to evaluate operating performance and believe that these non-GAAP measures are useful to enable investors and other external parties to perform comparisons of our current and historical performance.

A reconciliation of reported net income attributable to Amcor plc to Adjusted EBIT and Adjusted net income for the three months ended September 30, 2021 and 2020 is as follows:

(1)Material restructuring programs includes restructuring and related expenses for the 2019 Bemis Integration Plan for the three months ended September 30, 2021 and for the 2018 Rigid Packaging Restructuring Plan and the 2019 Bemis Integration Plan for the three months ended September 30, 2020. Refer to Note 3, "Restructuring," for more information about the Company's restructuring activities.

(2)Includes costs associated with the Bemis transaction.

(3)Amortization of acquired intangible assets from business combinations includes amortization expenses related to all acquired intangible assets from past acquisitions.

(4)Impact of hyperinflation includes the adverse impact of highly inflationary accounting for subsidiaries in Argentina where the functional currency was the Argentine Peso.

(5)Net gain on disposals includes the gain realized upon the disposal of AMVIG and the loss upon disposal of other non-core businesses not part of material restructuring programs. Refer to Note 14, "Disposals," for more information about our disposals.

(6)Property and other losses, net, includes property and related business losses primarily associated with the destruction of our Durban, South Africa, facility during general civil unrest in July 2021, net of insurance recovery deemed probable for incurred losses.

(7)Net tax impact on items (1) through (6) above.

Reconciliation of Net Debt

A reconciliation of total debt to net debt at September 30, 2021 and June 30, 2021 is as follows:

Supplemental Guarantor Information

Amcor plc, along with certain wholly owned subsidiary guarantors, guarantee the following senior notes issued by the wholly owned subsidiaries, Amcor Finance (USA), Inc., Amcor Flexibles North America, Inc. and Amcor UK Finance plc.

• 3.100% Guaranteed Senior Notes due 2026 of Amcor Flexibles North America, Inc.

• 2.630% Guaranteed Senior Notes due 2030 of Amcor Flexibles North America, Inc.

• 2.690% Guaranteed Senior Notes due 2031 of Amcor Flexibles North America, Inc.

• 3.625% Guaranteed Senior Notes due 2026 of Amcor Finance (USA), Inc.

• 4.500% Guaranteed Senior Notes due 2028 of Amcor Finance (USA), Inc.

• 1.125% Guaranteed Senior Notes due 2027 of Amcor UK Finance plc

The three notes issued by Amcor Flexibles North America, Inc. are guaranteed by its parent entity Amcor plc and the subsidiary guarantors Amcor Pty Ltd, Amcor Finance (USA), Inc., and Amcor UK Finance plc. The two notes issued by Amcor Finance (USA), Inc. are guaranteed by its parent entity Amcor plc and the subsidiary guarantors Amcor Pty Ltd, Amcor Flexibles North America, Inc., and Amcor UK Finance plc. The note issued by Amcor UK Finance plc is guaranteed by its parent entity, Amcor plc and the subsidiary guarantors Amcor Pty Ltd, Amcor Flexibles North America, Inc., and Amcor Finance (USA), Inc.

All guarantors fully, unconditionally, and irrevocably guarantee, on a joint and several basis, to each holder of the notes the due and punctual payment of the principal of, and any premium and interest on, such note and all other amounts payable, when and as the same shall become due and payable, whether at stated maturity, by declaration of acceleration, call for redemption or otherwise, in accordance with the terms of the notes and related indenture. The obligations of the applicable guarantors under their guarantees will be limited as necessary to recognize certain defenses generally available to guarantors (including those that relate to fraudulent conveyance or transfer, voidable preference, financial assistance, corporate purpose, or similar laws) under applicable law. The guarantees will be unsecured and unsubordinated obligations of the guarantors and will rank equally with all existing and future unsecured and unsubordinated debt of each guarantor. None of our other subsidiaries guarantee such notes. The issuers and guarantors conduct large parts of their operations through other subsidiaries of Amcor plc.

Amcor Flexibles North America, Inc. is incorporated in Missouri in the United States, Amcor Finance (USA), Inc. is incorporated in Delaware in the United States, Amcor UK Finance plc is incorporated in England and Wales, United Kingdom, and the guarantors are incorporated under the laws of Jersey, Australia, the United States, and England and Wales and, therefore, insolvency proceedings with respect to the issuers and guarantors could proceed under, and be governed by, among others, Jersey, Australian, United States, or English insolvency law, as the case may be, if either issuer or any guarantor defaults on its obligations under the applicable Notes or Guarantees, respectively.

Set forth below is the summarized financial information of the combined Obligor Group made up of Amcor plc (as parent guarantor), Amcor Flexibles North America, Inc., Amcor Finance (USA), Inc., and Amcor UK Finance plc (as subsidiary issuers of the notes and guarantors of each other’s notes) and Amcor Pty Ltd (as the remaining subsidiary guarantor).

Basis of Preparation

The following summarized financial information is presented for the parent, issuer, and guarantor subsidiaries ("Obligor Group") on a combined basis after elimination of intercompany transactions between entities in the combined group and amounts related to investments in any subsidiary that is a non-guarantor.

This information is not intended to present the financial position or results of operations of the combined group of companies in accordance with U.S. GAAP.

Statement of Income for Obligor Group

(1)Includes $142 million net income from subsidiaries outside the Obligor Group mainly made up of intercompany dividend and interest income.

Balance Sheets for Obligor Group

New Accounting Pronouncements

Refer to Note 2, "New Accounting Guidance," in "Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements."

Critical Accounting Estimates and Judgments

Our discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Our estimates and judgments are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. These critical accounting estimates are discussed in detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates and Judgments” in our Annual Report on Form 10-K for the year ended June 30, 2021.

Liquidity and Capital Resources

We finance our business primarily through cash flows provided by operating activities, borrowings from banks, and proceeds from issuances of debt and equity. We periodically review our capital structure and liquidity position in light of market conditions, expected future cash flows, potential funding requirements for debt refinancing, capital expenditures, and acquisitions, the cost of capital, sensitivity analyses reflecting downside scenarios, the impact on our financial metrics and credit ratings, and our ease of access to funding sources.

On July 15, 2021, we redeemed U.S. dollar notes with a principal amount of $400 million that had a contractual maturity of October 15, 2021 and carried an interest of 4.50%.

The COVID-19 pandemic has not had a material impact on our operations to date and therefore has not negatively impacted our liquidity position and current and expected cash flow from operating activities and available cash. We believe that our cash flows provided by operating activities, together with borrowings available under our credit facilities and access to the commercial paper market, backstopped by our bank facilities, will continue to provide sufficient liquidity to fund our operations, capital expenditures, and other commitments, including dividends and purchases of our ordinary shares and CHESS Depositary Instruments under authorized share repurchase programs, into the foreseeable future.

Overview

Cash Flow Overview

Net Cash Used in Operating Activities

Net cash used in operating activities increased by $2 million, or 2%, to $112 million for the three months ended September 30, 2021, from $110 million for the three months ended September 30, 2020.

Net Cash (Used in) Provided by Investing Activities

Net cash flow from investing activities decreased by $172 million, or 637%, to $145 million outflow for the three months ended September 30, 2021, from a $27 million inflow for the three months ended September 30, 2020. The decrease was primarily due to proceeds from divestitures in the prior period following the disposal of AMVIG and other non-core businesses, and higher capital expenditures in the current period.

Net Cash Provided by Financing Activities

Net cash flow from financing activities decreased by $9 million, or 12%, to $67 million inflow for the three months ended September 30, 2021, from a $76 million inflow for the three months ended September 30, 2020. The decrease is primarily due to share buybacks in the current period, partially offset by higher cash net debt drawdowns compared with the prior period.

Net Debt

We borrow from financial institutions and debt investors in the form of bank overdrafts, bank loans, corporate bonds, unsecured notes, and commercial paper. We have a mixture of fixed and floating interest rates and use interest rate swaps to provide further flexibility in managing the interest cost of borrowings.

Short-term debt consists of bank debt with a duration of less than 12 months and bank overdrafts which are classified as current due to the short-term nature of the borrowings, except where we have the ability and intent to refinance and as such extend the debt beyond 12 months. The current portion of the long-term debt consists of debt amounts repayable within a year after the balance sheet date.

Our primary bank debt facilities and notes are unsecured and subject to negative pledge arrangements limiting the amount of secured indebtedness we can incur to a range between 7.5% to 15.0% of our total tangible assets, subject to some exceptions and variations by facility. In addition, the bank debt facilities and U.S. private placement debt require us to comply with certain financial covenants, including leverage and interest coverage ratios. The negative pledge arrangements and the financial covenants are defined in the related debt agreements. As of September 30, 2021, we were in compliance with all applicable covenants under our bank debt facilities and U.S. private placement debt.

Our net debt as of September 30, 2021 and June 30, 2021 was $6.0 billion and $5.4 billion, respectively.

Available Financing

As of September 30, 2021, we had undrawn credit facilities available in the amount of $1.2 billion. Our senior facilities are available to fund working capital, growth capital expenditures, and refinancing obligations and are provided to us by three separate bank syndicates. These facilities mature between April 2023 and April 2025, and we have an option to extend the maturities for 12 months.

As of September 30, 2021, the revolving senior bank debt facilities had an aggregate limit of $3.8 billion, of which $2.6 billion had been drawn (inclusive of amounts drawn under commercial paper programs reducing the overall balance of available senior facilities).

Dividend Payments

We declared and paid a $0.1175 cash dividend per ordinary share during the first fiscal quarter which ended September 30, 2021.

Credit Rating

Our capital structure and financial practices have earned us investment grade credit ratings from two internationally recognized credit rating agencies. These investment credit ratings are important to our ability to issue debt at favorable rates of interest, for various terms, and from a diverse range of markets that are highly liquid, including European and U.S. debt capital markets and from global financial institutions.

Share Repurchases

On August 17, 2021, our Board of Directors approved a $400 million buyback of ordinary shares and Chess Depositary Instruments ("CDIs"). During the three months ended September 30, 2021, we repurchased approximately $64 million of ordinary shares and CDIs in the aggregate, including transaction costs, or 5 million shares. The shares repurchased as part of the program were canceled upon repurchase.

We had cash outflows of $131 million and $0 million for the purchase of our shares in the open market and using forwards contracts to purchase our own equity during the three months ended September 30, 2021 and 2020, respectively, as treasury shares to satisfy the vesting and exercises of share-based compensation awards. As of September 30, 2021, and June 30, 2021, we held treasury shares at cost of $50 million and $29 million, representing 4 million and 3 million shares, respectively.

There have been no material changes in our market risk during the three months ended September 30, 2021. For additional information, refer to Note 6, "Fair Value Measurements," and Note 7, "Derivative Instruments," to the notes to our unaudited condensed consolidated financial statements and to "Item 7A. - Quantitative and Qualitative Disclosures About Market Risk" of our Annual Report on Form 10-K for the year ended June 30, 2021.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2021. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2021.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the first quarter of fiscal 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

The material set forth in Note 13, "Contingencies and Legal Proceedings," in "Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements" is incorporated herein by reference.

There have been no material changes from the risk factors contained in "Item 1A. - Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchases

Share repurchase activity during the three months ended September 30, 2021 was as follows (in millions, except number of shares, which are reflected in thousands, and per share amounts, which are expressed in U.S. dollars):

(1) On August 17, 2021, our Board of Directors approved a buyback of $400 million of ordinary shares and/or CHESS Depositary Instruments ("CDIs") during the following twelve months. The timing, volume, and nature of share repurchases may be amended, suspended, or discontinued at any time.

(2) Includes shares purchased on the open market to satisfy the vesting and exercises of share-based compensation awards.

(3) Average price paid per share excludes costs associated with the repurchase.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Not applicable.

The documents in the accompanying Exhibits Index are filed, furnished, or incorporated by reference as part of this Quarterly Report on Form 10-Q, and such Exhibits Index is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.