Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

56K characters. Original on sec.gov · Markdown

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis ("MD&A") should be read in conjunction with our Form 10-K for fiscal year 2023 filed with the U.S. Securities and Exchange Commission (the "SEC") on August 17, 2023, together with the unaudited condensed consolidated financial statements and accompanying notes included in Part 1, Item 1 of this Form 10-Q. Throughout the MD&A, amounts and percentages may not recalculate due to rounding.

Summary of Financial Results


	Three Months Ended March 31,								Nine Months Ended March 31,
($ in millions)	2024				2023				2024				2023
Net sales	$	3,411	100.0	%	$	3,667	100.0	%	$	10,105	100.0	%	$	11,021	100.0	%
Cost of sales	(2,719)		(79.7	%)	(2,994)		(81.6	%)	(8,147)		(80.6	%)	(9,018)		(81.8	%)

Gross profit	692		20.3	%	673		18.4	%	1,958		19.4	%	2,003		18.2	%

Operating expenses:
Selling, general, and administrative expenses	(330)		(9.7	%)	(317)		(8.6	%)	(931)		(9.2	%)	(917)		(8.3	%)
Research and development expenses	(25)		(0.7	%)	(27)		(0.7	%)	(80)		(0.8	%)	(76)		(0.7	%)
Restructuring and other related activities, net	(30)		(0.9	%)	(50)		(1.4	%)	(82)		(0.8	%)	162		1.5	%
Other income/(expenses), net	—		—	%	3		0.1	%	(46)		(0.5	%)	11		0.1	%

Operating income	307		9.0	%	282		7.7	%	819		8.1	%	1,183		10.7	%

Interest income	10		0.3	%	15		0.4	%	31		0.3	%	35		0.3	%
Interest expense	(89)		(2.6	%)	(86)		(2.3	%)	(263)		(2.6	%)	(224)		(2.0	%)
Other non-operating income, net	2		0.1	%	2		0.1	%	2		—	%	5		—	%

Income before income taxes and equity in loss of affiliated companies	230		6.7	%	213		5.8	%	589		5.8	%	999		9.1	%

Income tax expense	(40)		(1.2	%)	(34)		(0.9	%)	(107)		(1.1	%)	(125)		(1.1	%)
Equity in loss of affiliated companies, net of tax	(1)		—	%	—		—	%	(3)		—	%	—		—	%

Net income	$	189	5.5	%	$	179	4.9	%	$	479	4.7	%	$	874	7.9	%

Net income attributable to non-controlling interests	(2)		(0.1	%)	(2)		(0.1	%)	(6)		(0.1	%)	(6)		(0.1	%)

Net income attributable to Amcor plc	$	187	5.5	%	$	177	4.8	%	$	473	4.7	%	$	868	7.9	%

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 2023, Amcor generated $14.7 billion in net sales.

Significant Developments Affecting the Periods Presented

Economic and Market Conditions

After experiencing more challenging market conditions in the first half of fiscal year 2024, with softer consumer and customer demand and increased destocking, particularly in the second quarter, customer volume trajectory sequentially improved in the third quarter of fiscal year 2024 due to the abatement of destocking across many end markets and higher customer demand in parts of our business. While we continue to be impacted by softer consumer demand and customer order volatility in certain markets, and higher inflation in certain areas, such as labor costs, we have flexed our cost base to adjust to market conditions. Higher inflation, especially in Europe and the United States, has led central banks to rapidly raise interest rates to dampen inflation which has resulted in higher interest expense on our variable rate debt, particularly on U.S. dollar and Euro denominated debt in the first half of fiscal year 2024 compared to the same period in fiscal year 2023.

The underlying causes for the market volatility experienced in fiscal year 2024, particularly in the first half, can be attributed to a variety of factors, such as geopolitical tension and conflicts, higher inflation in many economies impacting consumption and consumer demand, and customer destocking following a period of supply chain constraints. In this context, we have remained focused on taking price and cost actions to offset inflation, aligning our cost base with market dynamics, and managing working capital. Sequentially improved volumes combined with the realization of benefits from structural cost initiatives and flexing our cost base has resulted in improved performance in the third quarter of fiscal year 2024 versus the first half of fiscal year 2024, and we expect this improvement to continue in the last quarter of fiscal year 2024. However, there is no assurance that we will meet our performance expectations or that ongoing geopolitical tensions and other factors will not negatively impact our financial results.

Russia-Ukraine Conflict / 2023 Restructuring Plan

Russia's invasion of Ukraine that began in February 2022 continues as of the date of the filing of this quarterly report. In advance of the invasion, we proactively suspended operations at our small manufacturing site in Ukraine. We also operated our Russian business until its sale on December 23, 2022, for net cash proceeds of $365 million. In addition, we repatriated approximately $65 million in cash held in Russia as part of the transaction. We recorded a pre-tax net gain on sale of $215 million. The carrying value of the Russian business had previously been impaired by $90 million in the quarter ended June 30, 2022.

On February 7, 2023, we announced that we expect to invest $110 million to $130 million of the sale proceeds from the Russian business in various cost savings initiatives to partly offset divested earnings from the Russian business (the "2023 Restructuring Plan" or the "Plan"). We expect total Plan cash and non-cash net expenses of approximately $230 million. Of the remaining cash received from the sale of the Russian business, we allocated $100 million to the repurchase of additional shares and the remainder was used to reduce debt.

As of March 31, 2024, we have initiated restructuring and related projects with an expected net cost of approximately $227 million, of which approximately $120 million is expected to result in net cash expenditures. From the initiation of the Plan until March 31, 2024, we have incurred $80 million in employee-related expenses, $36 million in fixed asset related expenses, $38 million in other restructuring, and $17 million in restructuring related expenses. The Plan has resulted in $70 million of cash outflows to date.

Management initiated other restructuring actions in the fourth quarter of fiscal year 2022 to help mitigate the impact of the Russian sale. Management expects to realize an annualized pre-tax benefit of approximately $50 million from structural cost reduction actions taken as a result of all Russia related restructuring by the end of fiscal year 2025.

For further information, refer to Note 5, "Restructuring," of Part I, "Item 1, Notes to Condensed Consolidated Financial Statements".

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 was 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. Following the governmental election in the second quarter of fiscal year 2024, Argentina devalued the Argentine Peso by approximately 55% against the U.S. dollar. In the third quarter of fiscal year 2024, the Argentine Peso stabilized against the U.S. dollar. The impact of highly inflationary accounting in the three months ended March 31, 2024 and 2023 resulted in a negative impact on monetary assets of $4 million and $6 million, respectively, and $55 million and $19 million in the nine months ended March 31, 2024 and 2023, respectively, in foreign currency transaction losses that were reflected in the unaudited condensed consolidated statements of income. Our operations in Argentina represented approximately 2% of our consolidated net sales and annual adjusted earnings before interest and tax in fiscal years 2023 and 2022.

Results of Operations - Three Months Ended March 31, 2024

Consolidated Results of Operations


	Three Months Ended March 31,
($ in millions, except per share data)	2024			2023
Net sales	$	3,411		$	3,667
Operating income	307			282
Operating income as a percentage of net sales	9.0		%	7.7		%

Net income attributable to Amcor plc	$	187		$	177
Diluted Earnings Per Share	$	0.129		$	0.119

Net sales decreased by $256 million, or 7%, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Excluding the positive currency impacts of $33 million, the negative impacts from the pass-through of lower raw material costs of approximately $60 million, the remaining variation in net sales for the three months ended March 31, 2024 was a decrease of $228 million, or 6%. This reflects sales from acquired businesses of approximately 1%, an unfavorable price/mix impact of approximately 3%, and approximately 4% lower sales volumes.

Net income attributable to Amcor plc increased by $10 million, or 6%, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, mainly due to an increase in gross profit of $19 million with lower restructuring and related expenses, net, of $20 million, offset by higher selling, general, and administrative expenses of $13 million, higher net interest expense of $8 million, and higher income tax expenses of $6 million.

Diluted earnings per share ("Diluted EPS") increased by $0.010, or 8%, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, with the net income available to ordinary shareholders of Amcor plc increasing by 6% due to the above items and the diluted weighted average number of shares outstanding decreasing by 2%. The decrease in the diluted weighted average number of shares outstanding was largely due to the repurchase of shares under previously announced share buyback programs.

Segment Results of Operations

Flexibles Segment


	Three Months Ended March 31,
($ in millions)	2024			2023
Net sales	$	2,598		$	2,787
Adjusted EBIT	358			337
Adjusted EBIT as a percentage of net sales	13.8		%	12.1		%

Net sales decreased by $189 million, or 7%, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Excluding the positive currency impacts of $22 million, the negative impacts from the pass-through of lower raw material costs of approximately $50 million, the remaining variation in net sales for the three months ended March 31, 2024 was a decrease of $160 million, or 6%, reflecting an unfavorable price/mix impact of approximately 4% and approximately 2% lower sales volumes primarily due to greater volume weakness in relatively higher value healthcare categories.

Adjusted earnings before interest and tax ("Adjusted EBIT") increased by $21 million or 6% for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Excluding positive currency impacts of approximately $3 million, the remaining increase in Adjusted EBIT for the three months ended March 31, 2024, was $17 million, or 5%, driven by favorable operating cost performance more than offsetting the unfavorable volume and price/mix impacts.

Rigid Packaging Segment


	Three Months Ended March 31,
($ in millions)	2024			2023
Net sales	$	813		$	880
Adjusted EBIT	71			69
Adjusted EBIT as a percentage of net sales	8.7		%	7.8		%

Net sales decreased by $67 million, or 8%, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Excluding the positive currency impacts of $10 million and the negative impact from the pass-through of lower raw material costs of approximately $10 million, the remaining variation in net sales for the three months ended March 31, 2024 was a decrease of $68 million, or 8%, reflecting approximately 8% lower sales volumes.

Adjusted EBIT increased by $2 million, or 3%, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Excluding the positive currency impacts of $1 million, the remaining variation in Adjusted EBIT for the three months ended March 31, 2024 was an increase of $1 million, or 1%. This growth reflects favorable operating cost performance which more than offset the unfavorable volume performance.

Consolidated Gross Profit


	Three Months Ended March 31,
($ in millions)	2024			2023
Gross profit	$	692		$	673
Gross profit as a percentage of net sales	20.3		%	18.4		%

Gross profit increased by $19 million, growing 3%, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The increase was primarily driven by the impact of cost savings initiatives, which also drove an increase in gross profit as a percentage of sales to 20.3% for the three months ended March 31, 2024.

Consolidated Restructuring and Other Related Activities, Net


	Three Months Ended March 31,
($ in millions)	2024			2023
Restructuring and other related activities, net	$	(30)		$	(50)
Restructuring and other related activities, net, as a percentage of net sales	(0.9		%)	(1.4		%)

Restructuring and other related activities, net, decreased by $20 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The change was a result of a decrease in restructuring and related expenses, net, of $20 million, primarily related to the 2023 Restructuring Plan.

Consolidated Income Tax Expense


	Three Months Ended March 31,
($ in millions)	2024			2023
Income tax expense	$	(40)		$	(34)
Effective income tax rate	17.4		%	16.0		%

The provision for income taxes for the three months ended March 31, 2024 and 2023 is based on our estimated annual effective tax rate for the respective fiscal years which is applied on income before income taxes and equity in loss 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 March 31, 2024 increased by 1.4 percentage points compared to the three months ended March 31, 2023, primarily due to the difference in the magnitude of discrete events in both periods.

Results of Operations - Nine Months Ended March 31, 2024

Consolidated Results of Operations


	Nine Months Ended March 31,
($ in millions, except per share data)	2024			2023
Net sales	$	10,105		$	11,021
Operating income	$	819		$	1,183
Operating income as a percentage of net sales	8.1		%	10.7		%

Net income attributable to Amcor plc	$	473		$	868
Diluted Earnings Per Share	$	0.327		$	0.581

Net sales decreased by $916 million, or 8%, for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. Excluding the positive currency impacts of $186 million, the negative impacts from the pass-through of lower raw material costs of approximately $145 million, and the negative impact from the disposed Russian business of $156 million, the remaining decrease in net sales for the nine months ended March 31, 2024 was approximately $800 million, or 7%, reflecting approximately 7% lower sales volumes.

Net income attributable to Amcor plc decreased by $395 million, or 46%, for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. This is mainly due to the non-recurrence of the pre-tax net gain of $215 million on disposal of the Russian business in the nine months ended March 31, 2023, a decrease in other income/(expenses), net of $57 million, lower gross profit of $45 million, higher net interest expense of $43 million, and an increase in restructuring and related expenses, net, of $29 million.

Diluted earnings per share decreased by $0.254, or 44%, for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, with the net income available to ordinary shareholders of Amcor plc decreasing by 45% due to the above items and the diluted weighted average number of shares outstanding decreasing by 3% for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. The decrease in the diluted weighted average number of shares outstanding was largely due to the repurchase of shares under previously announced share buyback programs.

Segment Results of Operations

Flexibles Segment


	Nine Months Ended March 31,
($ in millions)	2024			2023
Net sales	$	7,646		$	8,378
Adjusted EBIT	$	992		$	1,043
Adjusted EBIT as a percentage of net sales	13.0		%	12.4		%

Net sales decreased by $732 million, or 9%, for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. Excluding the positive currency impacts of $158 million, the negative impacts from the pass-through of lower raw material costs of approximately $140 million, and the negative impact from the disposed Russian business of $156 million, the remaining variation in net sales for the nine months ended March 31, 2024 was a decrease of approximately $590 million, or 7%, mainly reflecting unfavorable sales volumes of approximately 7%, mainly reflecting lower market and customer demand and destocking particularly through the first half of the year.

Adjusted EBIT decreased by $51 million, or 5%, for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. Excluding positive currency impacts of $16 million and the negative net impact from the disposed Russian business of $50 million, the remaining decrease in Adjusted EBIT for the nine months ended March 31, 2024, was $17 million, or 2%, reflecting the net negative effect of 1% from unfavorable volumes and favorable operating cost performance, and net negative price/mix of 1%.

Rigid Packaging Segment


	Nine Months Ended March 31,
($ in millions)	2024			2023
Net sales	$	2,459		$	2,643
Adjusted EBIT	$	184		$	192
Adjusted EBIT as a percentage of net sales	7.5		%	7.3		%

Net sales decreased by $184 million, or 7%, for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. Excluding the positive currency impacts of $28 million and the positive impact from the pass-through of lower raw material costs of approximately $5 million, the remaining variation in net sales for the nine months ended March 31, 2024 was a decrease of $207 million, or 8%. This reflects favorable price/mix benefits of approximately 1% and unfavorable sales volumes of approximately 9%.

Adjusted EBIT decreased by $8 million, or 4%, for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. Excluding the positive currency impacts of $3 million, the remaining variation in Adjusted EBIT for the nine months ended March 31, 2024 was a decrease of $11 million, or 6%, reflecting the net negative effect of 15% from unfavorable volumes and favorable operating cost performance, partly offset by favorable price/mix of 9%.

Consolidated Gross Profit


	Nine Months Ended March 31,
($ in millions)	2024			2023
Gross profit	$	1,958		$	2,003
Gross profit as a percentage of net sales	19.4		%	18.2		%

Gross profit decreased by $45 million, or 2%, for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. The decrease was primarily driven by the impact of the disposed Russian business and lower volumes. Gross profit as a percentage of sales increased to 19.4% for the nine months ended March 31, 2024, driven by an improvement in operating cost performance.

Consolidated Restructuring and Other Related Activities, Net


	Nine Months Ended March 31,
($ in millions)	2024			2023
Restructuring and other related activities, net	$	(82)		$	162
Restructuring and other related activities, net, as a percentage of net sales	(0.8		%)	1.5		%

Restructuring and other related activities, net, changed by $244 million for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. The change was mainly a result of a pre-tax net gain of $215 million on the disposal of the Russian business in the nine months ended March 31, 2023, and an increase in restructuring and related expenses, net, of $29 million, primarily related to the 2023 Restructuring Plan.

Consolidated Other Income/(Expenses), Net


	Nine Months Ended March 31,
($ in millions)	2024			2023
Other income/(expenses), net	$	(46)		$	11
Other income, net as a percentage of net sales	(0.5		%)	0.1		%

Other income/(expenses), net changed by $57 million, for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, primarily from the adverse impact of the devaluation of the Argentine Peso.

Consolidated Interest Expense


	Nine Months Ended March 31,
($ in millions)	2024			2023
Interest expense	$	(263)		$	(224)
Interest expense as a percentage of net sales	(2.6		%)	(2.0		%)

Interest expense increased by $39 million, or 17%, for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, driven primarily by increased variable interest rates.

Consolidated Income Tax Expense


	Nine Months Ended March 31,
($ in millions)	2024			2023
Income tax expense	$	(107)		$	(125)
Effective income tax rate	18.2		%	12.5		%

The provision for income taxes for the nine months ended March 31, 2024 and 2023 is based on our estimated annual effective tax rate for the respective fiscal years which is applied on income before income taxes and equity in loss 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 nine months ended March 31, 2024 increased by 5.7 percentage points compared to the nine months ended March 31, 2023, primarily due to the difference in the magnitude of discrete events in both periods, mainly driven by tax benefits attributable to the disposal of the Russian business in the nine months ended March 31, 2023.

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"), earnings before interest and tax ("EBIT"), adjusted net income, and net debt. Such measures have not been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). These non-GAAP financial measures adjust for factors that are unusual or unpredictable. These measures exclude the impact of 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 and other impairments, net of insurance recovery, certain regulatory and litigation matters, significant pension settlements, impairments in goodwill and equity method investments, and certain acquisition-related expenses, including transaction and integration expenses, due diligence expenses, professional and legal fees, purchase accounting adjustments for inventory, order backlog, intangible amortization, changes in the fair value of contingent acquisition payments and economic hedging instruments on commercial paper, CEO transition costs, and impacts related to the Russia-Ukraine conflict. Note that while amortization of acquired intangible assets is excluded from non-GAAP adjusted financial measures, the revenue of the acquired entities and all other expenses unless otherwise stated, are reflected in Adjusted EBIT and adjusted net income and the acquired assets contribute to revenue generation.

This adjusted information should not be construed as an alternative to results determined in accordance with 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 and nine months ended March 31, 2024 and 2023 is as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
($ in millions)	2024		2023		2024		2023
Net income attributable to Amcor plc, as reported	$	187	$	177	$	473	$	868
Add: Net income attributable to non-controlling interests	2		2		6		6

Net income	189		179		479		874
Add: Income tax expense	40		34		107		125
Add: Interest expense	89		86		263		224
Less: Interest income	(10)		(15)		(31)		(35)
EBIT	308		284		818		1,188

Add: Amortization of acquired intangible assets from business combinations (1)	43		40		126		120
Add: Impact of hyperinflation (2)	4		6		55		19



Add/(Less): Restructuring and other related activities, net (3)	30		48		82		(156)
Add: CEO transition costs (4)	8		—		8		—
Add: Other (5)	4		4		17		2
Adjusted EBIT	$	397	$	382	$	1,106	$	1,173
Less: Income tax expense	(40)		(34)		(107)		(125)
Less: Adjustments to income tax expense (6)	(19)		(15)		(51)		(45)

Less: Interest expense	(89)		(86)		(263)		(224)
Add: Interest income	10		15		31		35
Less: Net income attributable to non-controlling interests	(2)		(2)		(6)		(6)
Adjusted net income	$	257	$	260	$	710	$	808

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

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

(3)Restructuring and other related activities, net primarily includes costs incurred in connection with the 2023 Restructuring Plan in fiscal year 2024. Fiscal year 2023 includes a pre-tax net gain on sale of the Russian business of $215 million in the nine months

ended March 31, 2023 (refer to Note 3, "Restructuring and Other Related Activities, Net"), and incremental costs and restructuring incurred in connection with the conflict in the three and nine months ended March 31, 2023.

(4)CEO transition costs primarily reflect accelerated compensation, including share-based compensation, granted to our former Chief Executive Officer and other transition related expenses.

(5)Other includes various expense and income items relating to acquisitions, retroactive foil duties, certain litigation reserve settlements, and fair value movements on economic hedges.

(6)Net tax impact on items (1) through (5) above.

Reconciliation of Net Debt

A reconciliation of total debt to net debt as of March 31, 2024 and June 30, 2023 is as follows:


($ in millions)	March 31, 2024		June 30, 2023
Current portion of long-term debt	$	12	$	13
Short-term debt	119		80
Long-term debt, less current portion	7,055		6,653
Total debt	7,186		6,746
Less cash and cash equivalents	457		689
Net debt	$	6,729	$	6,057

Supplemental Guarantor Information

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

$500 million, 4.000%, Guaranteed Senior Notes due 2025 of Amcor Flexibles North America, Inc.
$300 million, 3.100%, Guaranteed Senior Notes due 2026 of Amcor Flexibles North America, Inc.
$600 million, 3.625%, Guaranteed Senior Notes due 2026 of Amcor Flexibles North America, Inc.
$500 million, 4.500%, Guaranteed Senior Notes due 2028 of Amcor Flexibles North America, Inc.
$500 million, 2.630%, Guaranteed Senior Notes due 2030 of Amcor Flexibles North America, Inc.
$800 million, 2.690%, Guaranteed Senior Notes due 2031 of Amcor Flexibles North America, Inc.
€500 million, 1.125%, Guaranteed Senior Notes due 2027 of Amcor UK Finance plc
$500 million, 5.625% Guaranteed Senior Notes due 2033 of Amcor Finance (USA), Inc.

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

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 UK Finance plc is incorporated in England and Wales, United Kingdom, Amcor Finance (USA), Inc. is incorporated in Delaware in the United States, 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.

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 UK Finance plc, and Amcor Finance (USA), Inc. (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


($ in millions)	Nine Months Ended March 31, 2024
Net sales - external	$	732
Net sales - to subsidiaries outside the Obligor Group	3
Total net sales	735

Gross profit	139





Net income	$	380

Net income attributable to non-controlling interests	—

Net income attributable to Obligor Group	$	380

Balance Sheets for Obligor Group


($ in millions)	March 31, 2024		June 30, 2023
Assets
Current assets - external	$	1,708	$	1,184
Current assets - due from subsidiaries outside the Obligor Group	146		190
Total current assets	1,854		1,374
Non-current assets - external	1,439		1,415
Non-current assets - due from subsidiaries outside the Obligor Group	12,276		10,992
Total non-current assets	13,715		12,407
Total assets	$	15,569	$	13,781
Liabilities
Current liabilities - external	$	2,708	$	1,912
Current liabilities - due to subsidiaries outside the Obligor Group	22		37
Total current liabilities	2,730		1,949
Non-current liabilities - external	7,221		6,801
Non-current liabilities - due to subsidiaries outside the Obligor Group	10,742		9,917
Total non-current liabilities	17,963		16,718
Total liabilities	$	20,693	$	18,667

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 fiscal year ended June 30, 2023. There have been no material changes in critical accounting estimates and judgments as of March 31, 2024 from those described in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

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.

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 debt 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


	Nine Months Ended March 31,
($ in millions)	2024		2023
Net cash provided by operating activities	$	378	$	329
Net cash used in investing activities	(369)		(149)
Net cash used in financing activities	(206)		(372)

Cash Flow Overview

Net Cash Provided by Operating Activities

Net cash provided by operating activities increased by $49 million for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. The change is primarily driven by lower working capital outflows in the current period, partially offset by lower net income after adjusting for non-cash items in the current period as compared to the prior period.

Net Cash Used in Investing Activities

Net cash used in investing activities increased by $220 million for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. The change is primarily driven by the disposal proceeds collected from the sale of the Russian business in the prior period, partially offset by lower outflows for investments in affiliated companies and business acquisitions compared to the prior period.

Net Cash Used in Financing Activities

Net cash used in financing activities decreased by $166 million for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. The change is primarily driven by lower share buyback activity in the current 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.

In March 2023, we entered into two interest rate swap contracts for a total notional amount of $1.2 billion. Under the terms of the contracts, we pay a weighted average fixed rate of interest of 3.88% and receive a variable rate of interest based on 1-month Term Secured Overnight Financing Rate ("SOFR"). The swaps have been effective as of July 1, 2023, and mature on June 30, 2024. The interest rate swap contracts economically hedge the SOFR component of our forecasted commercial paper issuances.

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 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 10.0% of our total tangible assets, subject to some exceptions and variations by facility. In addition, the covenants of the bank debt facilities require us to maintain a leverage ratio not higher than 3.9 times. The negative pledge arrangements and the financial covenants are defined in the related debt agreements. As of March 31, 2024, we were in compliance with all applicable covenants under our bank debt facilities.

Our net debt as of March 31, 2024 and June 30, 2023 was $6.7 billion and $6.1 billion, respectively.

Debt Facilities

As of March 31, 2024, we had undrawn credit facilities available in the amount of $0.9 billion. Our senior facilities are available to fund working capital, capital expenditures, and refinancing obligations and are provided to us by two bank syndicates. On April 23, 2024, the Company extended the maturity of its three-year syndicated facility agreement by one year until April 2026. The three-year syndicated facility agreement will be reduced from $1.9 billion to $1.7 billion effective April 2025. Our five-year syndicated credit facility matures in April 2027 and provides a revolving credit facility of $1.9 billion. The three-year facility has one 12-month option available to us to extend the maturity date and the five-year facility has two 12-month options available to us to extend the maturity date.

As of March 31, 2024, the revolving senior bank debt facilities had an aggregate limit of $3.8 billion, of which $2.9 billion had been drawn (inclusive of amounts drawn under commercial paper programs reducing the overall balance of available senior facilities). Subject to certain conditions, we can request the total commitment level under each agreement to be increased by up to $500 million.

Dividend Payments

We declared and paid a $0.1225 cash dividend per ordinary share during the three months ended September 30, 2023, a $0.1250 cash dividend per ordinary share during the three months ended December 31, 2023, and a $0.1250 cash dividend per ordinary share during the three months ended March 31, 2024.

Credit Rating

Our capital structure and financial practices have earned us investment grade credit ratings from two internationally recognized credit rating agencies. These investment grade 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 February 7, 2023, our Board of Directors approved a $100 million buyback of ordinary shares and/or CHESS Depositary Instruments ("CDIs") in the following twelve months. On February 6, 2024, our Board of Directors extended the approval for the remaining $39 million of ordinary shares and CDIs of the $100 million buyback until June 30, 2024. During the nine months ended March 31, 2024, we repurchased approximately $30 million of ordinary shares and CDIs in the aggregate, including transaction costs, or 3 million shares. The shares repurchased as part of the program were canceled upon repurchase.

We had cash outflows of $48 million and $221 million for the purchase of our shares in the open market and using forward contracts to purchase our own equity during the nine months ended March 31, 2024 and 2023, respectively, as treasury shares to satisfy the vesting and exercises of share-based compensation awards. As of March 31, 2024 and June 30, 2023, we held treasury shares at a cost of $11 million and $12 million, respectively, representing approximately 1 million shares.

Previous: Item 1. Financial Statements (unaudited) · Next: Item 3. Quantitative and Qualitative Disclosures About Market Risk