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(Exact name of Registrant as specified in its charter)
iJersey
i98-1455367
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
i83 Tower Road North
iWarmley,
BristoliBS30 8XP
iUnited Kingdom
(Address of principal executive offices)
Registrant’s
telephone number, including area code: +i44i117i9753200
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
iOrdinary Shares, Par Value
$0.01 Per Share
iAMCR
iThe New York Stock Exchange
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. iYes☒ 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). iYes☒ No ☐
1
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):
Large Accelerated Filer
☐
Emerging growth company
i☐
iNon-Accelerated
Filer
☒
Smaller Reporting Company
i☐
Accelerated Filer
☐
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 Act). Yes i☐No ☒
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 estimates, predictions, and other "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identified with words like "believe,""expect,""anticipate,""intend,""estimate,""target,""may,""will,""plan,""project,""should,""continue,""outlook,""approximately,""would,""could," or the negative thereof or other similar expressions, or discussion of future goals or aspirations, which are predictions of or indicate future events and trends and which do not relate to historical matters. Such statements are based on information available to management as of the time of such statements and relate to, among other things, expectations of the business environment in which we operate, projections of future performance (financial and otherwise), including those of acquired companies, perceived opportunities in the market and statements regarding our strategy and vision. Forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause actual results, performance, or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by
such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Factors that could cause actual results to differ from those expected include, but are not limited to:
•
We are exposed 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 could have a significant adverse impact on our sales revenue and profitability;
•
significant competition in the industries and regions in which we operate, which could adversely affect our business;
•
the failure to realize the anticipated benefits of the acquisition of Bemis;
•
the
failure to successfully integrate the business and operations of Bemis in the expected time frame may adversely affect our future results;
•
we may be unable to expand our current business effectively through either organic growth, including by product innovation, or acquisitions;
•
challenges to or the loss of our intellectual property rights could have an adverse impact on our ability to compete effectively;
•
challenging
current and future global economic conditions have had, and may continue to have, a negative impact on our business operations and financial results;
•
our international operations subject us to various risks that could adversely affect our business operations and financial results;
•
price fluctuations or shortages in the availability of raw materials, energy and other inputs could adversely affect our business;
•
we
are subject to production, supply and other commercial risks, including counterparty credit risks, which may be exacerbated in times of economic downturn;
•
a failure in our information technology systems could negatively affect our business;
•
if we are unable to attract and retain key personnel, we may be adversely affected;
•
we
are subject to costs and liabilities related to current and future environmental and health and safety laws and regulations that could adversely affect our business;
•
we are subject to the risk of labor disputes, which could adversely affect our business;
•
our financing agreements may need to be renegotiated if the London Interbank Offered Rate ("LIBOR") ceases to exist;
•
we
are exposed to foreign exchange rate risk;
•
an increase in interest rates could reduce our reported results of operations;
•
a downgrade in our credit rating could increase our borrowing costs and negatively affect our financial condition and results of operations;
•
failure to hedge effectively
against adverse fluctuations in interest rates and foreign exchange rates could negatively impact our results of operations;
•
a significant write-down of goodwill and/or other intangible assets would have a material adverse effect on our reported results of operations and net worth;
•
significant demands will be placed on our financial controls and reporting systems as a result of the acquisition of Bemis;
•
if
we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock;
3
•
our insurance policies, including our use of a captive insurance company, may not provide adequate protection against all of the risks we face;
•
litigation
or regulatory developments could adversely affect our business operations and financial performance;
•
changing government regulations in environmental, health, and safety matters may adversely affect our company; and
•
our success is dependent on our ability to develop and successfully introduce new products and to develop, acquire and retain intellectual property rights.
These
and other risks, uncertainties, and assumptions identified from time to time in our filings with the Securities and Exchange Commission, including without limitation, those described under "Item 1A - Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 could cause actual future results to differ materially from those projected in the forward-looking statements. In addition, actual future results could differ materially from those projected in the forward-looking statements as a result of changes in the assumptions used in making such forward-looking statements.
You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed as exhibits to this Quarterly Report completely and with the understanding that our actual future results may be materially
different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Notes to Condensed Consolidated Financial Statements
Note
1 - iNature of Operations and Basis of Presentation
Amcor plc ("Amcor" or the "Company") is a global packaging company that employs approximately i50,000
people across approximately i250 sites in more than i40 countries.
The Company develops and produces a broad range of packaging products including flexible packaging and rigid packaging containers.
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by U.S. GAAP for complete financial statements. It is management's opinion, however, that all material adjustments (consisting of normal recurring accruals) have been made which are necessary for a fair statement of its financial position, results of operations and cash flows. For further information, this Form 10-Q should be read in conjunction with the
Consolidated Financial Statements and accompanying Notes in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2019.
Note 2 - iNew
Accounting Guidance
Recently Adopted Accounting Standards
In February 2018, the Financial Accounting Standards Board ("FASB") issued guidance that requires the Company to disclose a description of the Company’s accounting policy for releasing income tax effects from accumulated other comprehensive income and whether the Company elects to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act (‘‘The Act’’), along with information about other income tax effects that are reclassified.
For all entities, the guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Entities can choose whether to apply the amendments retrospectively to each period in which the effect of the Act is recognized or to apply the amendments in the period of adoption. This guidance was effective for the Company on July 1, 2019. The Company adopted the new guidance effective July 1, 2019 and did not elect the optional reclassification.
In August 2017, the FASB issued guidance which simplifies existing guidance
in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. For public business entities, the amendments in Accounting Standards Update ("ASU") 2017-12 were effective for financial statements issued for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. This guidance was effective for the Company on July 1, 2019 using the modified respective approach, with the exception of presentation and disclosure guidance which is adopted prospectively. Implementation of the standard did not have a material impact on the the Company's condensed consolidated financial statements.
In
February 2016, the FASB issued guidance that required lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to today’s accounting. The guidance also eliminates today’s real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs and lease executory costs for all entities. Lease classification will determine how to recognize lease-related revenue and expense. The Company adopted the new lease standard at July 1, 2019 using a simplified transition option that allows for a cumulative-effect adjustment in the period of adoption and therefore did not restate prior periods. The Company also elected to adopt the package of practical expedients
which allows for existing operating leases to continue to be classified as operating leases under the new guidance without reassessing whether the contracts contain a lease under the new guidance or whether classification of the operating lease would be different under the new standard. The Company did not elect the use-of-hindsight practical expedient but did adopt the practical expedient pertaining to land easements which provides the option not to reassess whether land easements not previously accounted for as leases under prior leasing guidance would be leases under the new guidance.
Adoption of the new leasing standard resulted in the following impacts to the
Company's unaudited condensed consolidated financial statements: the establishment of a lease liability of $i590.5 million, including current portion, a corresponding right-of-use asset of $i569.8
million, and the reclassification of approximately $i58.2 million (net of tax) of deferred gains on sale leaseback transactions.
10
i
The
complete impact of the changes made to the Company's unaudited condensed consolidated balance sheet due to the adoption of the new leasing guidance were as follows:
Due
to the adoption of the guidance using the simplified transition option, there are no changes to the Company's previously reported results prior to July 1, 2019. Lease expense is not expected to change materially as a result of adoption of the new guidance. The Company changed its disclosures related to leasing beginning in fiscal year 2020. Refer to Note 10, "Leases".
Accounting Standards Not Yet Adopted
In June 2016, the FASB issued guidance which requires financial assets or
a group of financial assets measured at amortized cost basis to be presented at the net amount expected to be collected when finalized. The allowance for credit losses is a valuation account that will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. This guidance affects loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The guidance will be effective for the Company
on July 1, 2020 and will be adopted using the modified retrospective approach. The Company is currently assessing the impact that the adoption of this new guidance will have on its condensed consolidated financial statements.
The Company considers the applicability and impact of all ASUs issued by the FASB. The Company determined that all other ASUs not yet adopted to be either not applicable or are expected to have minimal impact on the Company's consolidated financial statements at this
time.
11
Note 3 - iAcquisitions
Bemis
Company, Inc.
On June 11, 2019, the Company completed the acquisition of i100% of the outstanding shares of Bemis Company, Inc ("Bemis"), a global manufacturer of flexible packaging products based
in the United States. Pursuant to the Transaction Agreement, dated as of August 6, 2018, each outstanding share of Bemis common stock that was issued and outstanding upon completion of the transaction was converted into the right to receive i5.1 ordinary shares of the Company traded on the New York Stock Exchange ("NYSE").
i
The
following table summarizes the fair value of consideration exchanged:
Bemis shares outstanding at June 11, 2019 (in millions)
i91.7
Share
exchange ratio
i5.1
Price per share (based on Amcor’s closing share price on June 11, 2019)
$
i11.18
Total
equity consideration ($ in millions)
$
i5,229.6
/
The
acquisition of Bemis positions the Company as a global leader in consumer packaging with a comprehensive global footprint in flexible packaging and greater scale in key regions of North America, Latin America, Asia Pacific and Europe, along with industry-leading research and development capabilities. The Bemis acquisition contributed approximately $i970 million
in net sales and a $i6 million net loss, which includes transaction and integration related costs and purchase accounting, to the first quarter of fiscal year 2020 results.
The acquisition of Bemis was accounted for as a business combination in accordance with ASC 805, "Business Combinations," which required allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed
in the transaction. Since the date of acquisition, the Company has revised the allocation of the purchase price of the tangible and intangible assets and liabilities assumed based on an analysis of information that has been made available as of September 30, 2019. The changes in estimates recorded at September 30, 2019 include a $i16.9
million increase to inventories, a $i119.0 million decrease to finite lived intangible assets, a $i48.6
million increase in assets held for sale, a $i111.9 million decrease to deferred tax liabilities, a $i41.9
million increase to other non-current liabilities and a $i6.6 million decrease to goodwill. The allocation of fair value for the assets and liabilities acquired remains preliminary and may continue to be adjusted up to one year after the acquisition. Accordingly, final determination of the fair values may result in further adjustments to the values presented in the table on the next page.
12
i
($
in millions)
Cash and cash equivalents
$
i3.3
Trade
receivables
i436.4
Inventories
i682.0
Prepaid
expenses and other current assets
i83.5
Assets held for sale
i464.2
Property,
plant and equipment
i1,388.3
Deferred tax assets
i35.5
Other
intangible assets
i1,911.2
Other non-current assets
i34.5
Total
identifiable assets acquired
i5,038.9
Current portion of long-term debt
i1.7
Short-term
debt
i8.6
Trade payables
i287.7
Accrued
employee costs
i159.3
Other current liabilities
i281.8
Liabilities
held for sale
i21.9
Long-term debt, less current portion
i1,365.3
Deferred
tax liabilities
i670.7
Employee benefit obligation
i62.6
Other
non-current liabilities
i80.8
Total liabilities assumed
i2,940.4
Net
identifiable assets acquired
i2,098.5
Goodwill
i3,131.1
Net
assets acquired
$
i5,229.6
/
i
The
following table details the preliminary identifiable intangible assets acquired from Bemis, their fair values and estimated useful lives:
Fair Value
Weighted-average Estimated Useful Life
($ in millions)
(Years)
Customer
relationships
$
i1,630.0
i15
Technology
i110.0
i7
Other
i171.2
i8
Total
other intangible assets
$
i1,911.2
/
The
purchase price allocation is preliminary in nature and subject to adjustments, which could be material. Any necessary adjustments will be finalized within one year from the date of acquisition. The preliminary allocation of the purchase price as of September 30, 2019 has resulted in $i3,131.1 million of goodwill for the Flexibles segment, which is not tax deductible. The goodwill on acquisition represents the future economic benefit expected to arise from other intangible assets
acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships, as well as expected future synergies. As the Company finalizes the valuation of assets acquired and liabilities assumed, it will determine to which reporting units within the Company's segments any changes in goodwill should be recorded.
The fair value measurement of tangible and intangible assets and liabilities was based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy. Level 3 fair market values were determined using a variety of information, including estimated future cash flows, appraisals and market
13
comparables.
Closing of the Bemis acquisition was conditional upon the receipt of regulatory approvals, approval by both Amcor and Bemis shareholders, and satisfaction of other customary conditions. In order to satisfy certain regulatory approvals, the Company was required to divest three of Bemis' medical packaging facilities located in the United Kingdom and Ireland ("EC Remedy") and three Amcor medical packaging facilities in the United States ("U.S. Remedy"). The U.S. Remedy was completed during the fourth quarter of
fiscal 2019 and the Company received $i214.2 million resulting in a gain of $i159.1
million. The EC Remedy was completed during the first quarter of fiscal 2020 and the Company received $i397.1 million and recorded a loss on the sale of $i8.8
million which is the result of the reclassification of accumulated foreign currency translation amounts from accumulated other comprehensive income to earnings from discontinued operations upon sale of the EC Remedy.
The following unaudited pro forma information has been prepared as if the acquisition of Bemis and the sale of the EC Remedy and U.S. Remedy had occurred as of July 1, 2018. iThe unaudited
pro forma information combines the historical results of Amcor and Bemis.
Three Months Ended September 30,
($ in millions)
2018
Net sales
$
i3,223.5
Income
from continuing operations
$
i126.5
Pro
forma adjustments to net sales are as follows:
•
Excludes net sales of the EC Remedy and U.S. Remedy.
Pro forma adjustments to income from continuing operations attributable to Amcor plc are as follows:
•
Excludes income from the EC Remedy which has been accounted for as a discontinued operation and the U.S. Remedy which has been reported in U.S. GAAP
income from continuing operations;
•
excludes acquisition related charges;
•
includes preliminary acquisition accounting adjustments, including amortization and depreciation adjustments as a result of the fair value adjustment to property, plant and equipment; and
•
excludes the impact on net income
attributable to purchase accounting related inventory effects and sales backlog amortization given these charges do not have a continuing impact on the consolidated results.
The pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisition been in effect for the periods presented, nor is it intended to be a projection of future results. For example, the pro forma results do not include the expected synergies from the transactions, nor the related costs to achieve.
14
Note
4 - iDiscontinued Operations
On February 11, 2019, the Company received approval from the European Commission ("EC") for the acquisition of Bemis. A condition of the approval was an agreement to divest three
Bemis medical packaging facilities located in the United Kingdom and Ireland ("EC Remedy"). Upon completion of the Bemis acquisition on June 11, 2019, the Company determined that the EC Remedy met the criteria to be classified as a discontinued operation, in accordance with ASC 205-20, "Discontinued Operations." The sale of the EC Remedy closed on August 8, 2019. The Company recorded a loss on the sale of $i8.8
million, which is the result of the reclassification of accumulated foreign currency translation amounts from accumulated other comprehensive income to earnings from discontinued operations upon sale of the EC Remedy.
i
The following table summarizes the results of the EC Remedy, classified as discontinued operations, from July 1,
2019 until the sale of the EC Remedy on August 8, 2019:
Three Months Ended September 30,
($ in millions)
2019
Net sales
$
i15.8
Income
(loss) from discontinued operations
(i7.1
)
Tax expense on discontinued operations
i0.6
Income
(loss) from discontinued operations, net of tax
$
(i7.7
)
/
Note
5 - iRestructuring Plans
2019 Bemis Integration Plan
In connection with the acquisition of Bemis, the Company initiated restructuring activities in the fourth quarter of 2019 aimed at integrating and
optimizing the combined organization. As previously announced, the Company continues to target realizing approximately $i180 million of pre-tax synergies driven by procurement, supply chain, and general and administrative savings by the end of fiscal year 2022.
The
Company's total Plan pre-tax restructuring costs are expected to be approximately $i200 million. The Company estimates that approximately $i150
million of the $i200 million total costs will result in cash expenditures. Cash payments for the first quarter of fiscal year 2020 were $i18.0
million, which includes $i6.0 million of restructuring related expenditures. Cash payments of approximately $i80
million are expected for the balance of the fiscal year. The 2019 Bemis Integration Plan relates to the Flexibles segment and Corporate and is expected to be completed by the end of fiscal year 2022.
2018 Rigid Packaging Restructuring Plan
On August 21, 2018, the Company announced a restructuring plan in Amcor Rigid Packaging ("2018 Rigid Packaging Restructuring Plan") aimed at reducing structural costs and optimizing the footprint. The Plan includes the closures of manufacturing facilities and headcount reductions to achieve manufacturing footprint optimization and productivity improvements
as well as overhead cost reductions.
The Company's total Plan pre-tax restructuring costs are expected to be approximately $i95 million with the main component being the cost to exit manufacturing facilities and employee related costs. The
Company estimates that approximately $i65 million of the $i95
million total costs will result in cash expenditures. Cash payments for the first quarter of fiscal year 2020 were $i3.0 million, with $i15
million to $i20 million expected during the remainder of the fiscal year. The Plan is expected to be materially completed during this fiscal year.
Other Restructuring Plans
The
Company entered into other individually immaterial restructuring plans ("Other Restructuring Plans"). The Company's restructuring charge related to these Plans was approximately $i0.3 million and $i2.4
million for the three months ended September 30, 2019 and 2018, respectively.
15
Consolidated Amcor Restructuring Plans
i
The
total costs incurred from the beginning of the Company's restructuring plans are as follows:
($ in millions)
2018 Rigid Packaging Restructuring Plan
2019
Bemis Integration Plan
Other Restructuring Plans (1)
Total Restructuring and Related Expenses
Fiscal year 2019 net charges to earnings
i64.1
i47.9
i18.8
i130.8
Fiscal
year 2020 first quarter net charges to earnings
i3.4
i13.9
i0.3
i17.6
Expense
incurred to date
$
i67.5
$
i61.8
$
i19.1
$
i148.4
/
(1)
The
Company entered into other individually immaterial restructuring plans. The Company's total incurred restructuring charge for these plans primarily relates to the Flexibles segment. Cash payments for these plans during the first quarter of fiscal year 2020 were $i7.8 million.
i
An
analysis of the Company's restructuring plan liability is as follows:
The
costs related to restructuring activities have been presented on the consolidated statement of income as restructuring and related expenses. The accruals related to restructuring activities have been recorded on the unaudited condensed consolidated balance sheet under other current liabilities.
Other
includes $i14.0 million and $i14.2
million for September 30, 2019 and June 30, 2019, respectively, of acquired intellectual property assets not yet being amortized as the related R&D projects have not yet been completed.
Amortization expense for intangible assets during the three months ended September 30, 2019 and 2018 were $i73.5
million and $i8.1 million, respectively.
17
Note 8 - iFair
Value Measurements
The fair values of the Company’s financial assets and financial liabilities listed below reflect the amounts that would be received to sell the assets or paid to transfer the liabilities in an orderly transaction between market participants at the measurement date (exit price).
The Company’s non-derivative financial instruments primarily include cash and cash equivalents, trade receivables, trade payables, short-term debt and long-term debt. At September 30, 2019 and June 30,
2019, the carrying value of these financial instruments, excluding long-term debt, approximates fair value because of the short-term maturities of these instruments.
The fair value of long-term debt with variable interest rates approximates its carrying value. The fair value of the Company’s long-term debt with fixed interest rates is based on market prices, if available, or expected future cash flows discounted at the current interest rate for financial liabilities with similar risk profiles. iThe
carrying values and estimated fair values of long-term debt with fixed interest rates (excluding capital leases) were as follows:
Total
long-term debt with fixed interest rates (excluding commercial paper and capital leases)
$
i2,536.2
$
i2,650.0
$
i2,955.6
$
i3,041.3
Assets
and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
Additionally, the Company measures and records certain assets and liabilities, including derivative instruments and contingent purchase consideration liabilities, at fair value. iThe following table summarizes the fair value of these instruments, which are
measured at fair value on a recurring basis, by level, within the fair value hierarchy:
The
fair value of the commodity contracts was determined using a discounted cash flow analysis based on the terms of the contracts and observed market forward prices discounted at a currency-specific rate. Forward exchange contract fair values were determined based on quoted prices for similar assets and liabilities in active markets using inputs such as currency rates and forward points. The fair value of the interest rate swaps was determined using a discounted cash flow method based on market-based swap yield curves, taking into account current interest rates.
The fair value of the contingent purchase consideration
liabilities was determined for each arrangement individually. The fair value was determined using the income approach with significant inputs that are not observable in the market. Key assumptions include the discount rates consistent with the level of risk of achievement and probability adjusted financial projections. The expected outcomes are recorded at net present value, which requires adjustment over the life for changes in risks and probabilities.
The fair value of contingent purchase consideration liabilities is included in other current liabilities and other non-current liabilities in the unaudited condensed consolidated balance sheet.
Note 9
- iDerivative Instruments
Amcor periodically uses derivatives and other financial instruments to hedge exposures to interest rate, commodity and currency risks. The Company does not hold or issue financial instruments for speculative or trading purposes. For hedges that meet the hedge accounting criteria, the
Company, at inception, formally designates and documents the instrument as a fair value hedge or a cash flow hedge of a specific underlying exposure. On an ongoing basis, the Company assesses and documents that its hedges have been and are expected to continue to be highly effective.
Interest Rate Risk
The Company’s policy is to manage exposure to interest rate risk by maintaining a mixture of fixed-rate and variable-rate debt, monitoring global interest rates and, where appropriate, hedging floating interest rate exposure or debt at fixed interest rates through the use of interest rate swaps. For interest rate
swaps that are accounted for as fair value hedges, changes in the fair value of both the hedging instruments and the underlying debt obligations are immediately recognized in interest expense. Changes in the fair value of interest rate swaps that have not been designated as hedging instruments are reported in the accompanying unaudited condensed consolidated statement of income under other non-operating income (loss), net.
During the three months ended September 30, 2019, the Company entered into a cross-currency interest rate swap with a notional amount of $i100.0
million. The Company did not designate it as a hedging instrument and thus changes in fair value were immediately recognized in earnings.
As of September 30, 2019 and June 30, 2019, the total notional amount of the Company’s receive-fixed/pay-variable interest rate swaps accounted for as fair value hedges was $i828.3
million and $i841.1 million, respectively.
19
Foreign Currency Risk
The
Company manufactures and sells its products and finances operations in a number of countries throughout the world and, as a result, is exposed to movements in foreign currency exchange rates. The purpose of the Company’s foreign currency hedging program is to manage the volatility associated with the changes in exchange rates.
To manage this exchange rate risk, the Company utilizes forward contracts. Contracts that qualify for hedge accounting are designated as cash flow hedges of certain forecasted transactions denominated
in foreign currencies. The effective portion of the changes in fair value of these instruments is reported in AOCI and reclassified into earnings in the same financial statement line item and in the same period or periods during which the related hedged transactions affect earnings. The ineffective portion is immediately recognized in the unaudited condensed consolidated statement of income. Changes in the fair value of forward contracts that have not been designated as hedging instruments are reported in the accompanying unaudited condensed consolidated statement of income.
The Company manages its currency exposure related to the net assets of its foreign operations primarily through borrowings denominated in the relevant currency. Foreign currency gains and losses from the remeasurement of external borrowings designated as net investment hedges of a foreign operation are recognized in AOCI, to the extent that the hedge is effective. The ineffective portion is immediately recognized in other non-operating income (loss), net in the unaudited condensed consolidated statement of income. When a hedged net investment is disposed of, a percentage of the cumulative amount recognized in AOCI in relation to the hedged net investment is recognized in the unaudited condensed consolidated statement of income as part of
the profit or loss on disposal.
As of September 30, 2019, the carrying value of commercial paper issued which is designated as a net investment hedge was $i67.0 million.
Commodity Risk
Certain
raw materials used in the Company's production processes are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. To manage the volatility in earnings due to price fluctuations, the Company utilizes fixed price swaps. Information about commodity price exposure is derived from supply forecasts submitted by customers and these exposures are hedged by a central treasury unit. Changes in the fair value of commodity hedges are recognized in AOCI. The cumulative amount of the hedge is recognized in the unaudited condensed consolidated statement of income when the forecast transaction is realized.
In
addition to the fair value associated with derivative instruments noted in the table above, the Company had a carrying value of $i67.0 million associated with non-derivative instruments designated as foreign currency net investment hedges as of both September 30, 2019 and June 30,
2019. The designated foreign currency-denominated debt is included in long-term debt in the unaudited condensed consolidated balance sheet.
Certain derivative financial instruments are subject to master netting arrangements and are eligible for offset. The Company has made an accounting policy election not to offset the fair values of these instruments within the unaudited condensed consolidated balance sheet.
21
i
The
following tables provide the effects of derivative instruments on AOCI and in the unaudited condensed consolidated statement of income:
Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Location
of Gain (Loss) Recognized in the Unaudited Condensed Consolidated Statement of Income
Gain (Loss) Recognized in Income for Derivatives in Fair Value Hedging Relationships
Three Months Ended September 30,
($ in millions)
2019
2018
Derivatives
in fair value hedging relationships
Interest rate swaps
Interest expense
$
(i0.1
)
$
(i3.7
)
Total
$
(i0.1
)
$
(i3.7
)
/
22
Note
10 - iLeases
i
The Company has operating leases
for certain manufacturing sites, office space, warehouses, land, vehicles and equipment. Most leases include the option to renew, with renewal terms that can extend the lease term from one to five years or more. Right-of-use lease assets and lease liabilities are recognized at the commencement date based on the present value of the remaining lease payments over the lease term which includes renewal periods the Company is reasonably certain to exercise. Short term leases with a term of twelve months or less, including reasonably certain holding periods, are not recorded on the balance sheet. The Company's leases do not contain any material residual value guarantees or material restrictive covenants. At September 30, 2019,
the Company does not have material lease commitments that have not commenced.
i
The components of lease expense were as follows:
(in millions)
Three
Months Ended September 30,
Statement of Income Location
2019
Operating leases
Cost of products sold
$
i22.7
Selling,
general and administrative expenses
i5.7
Total lease cost (1)
$
i28.4
/
(1)
Includes
short-term leases and variable lease costs, which are immaterial.
Lease costs for finance leases were immaterial for the three months ended September 30, 2019.
i
Supplemental balance sheet information related to leases was as follows:
Finance
lease assets are recorded net of accumulated amortization of $i7.8 million at September 30, 2019.
As the Company's leases do not provide an implicit rate, the
Company uses its incremental borrowing rate as of the commencement date to determine the present value of lease payments.
i
Supplemental cash flow information related to leases was as follows:
Three
Months Ended September 30,
(in millions)
2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
i27.0
Lease
assets obtained in exchange for new lease obligations:
Operating leases
$
i25.7
Finance
leases
$
i0.8
/
23
i
Maturities
of lease liabilities were as follows:
(in millions)
Operating Leases
Finance Leases
Remainder of 2020
$
i82.8
$
i1.4
2021
i94.2
i1.1
2022
i82.5
i1.0
2023
i71.7
i0.8
2024
i61.3
i0.7
Thereafter
i351.0
i0.3
Total
lease payments
i743.5
i5.3
Less:
imputed interest
i153.0
i1.1
Present
value of lease liabilities
$
i590.5
$
i4.2
/
i
The
Company’s future minimum lease commitments as of June 30, 2019, under Accounting Standard Codification Topic 840, the predecessor to Topic 842, are as follows:
(in millions)
Operating Leases
2020
$
i97.6
2021
i90.4
2022
i77.7
2023
i67.3
2024
i55.9
Thereafter
i301.8
Total
minimum obligations
$
i690.7
/
i
The
weighted average remaining lease term and discount rate are as follows:
Note
11 - iComponents of Net Periodic Benefit Cost
i
Net periodic
benefit cost for benefit plans include the following components:
Three Months Ended September 30,
($ in millions)
2019
2018
Service
cost
$
i6.2
$
i3.9
Interest
cost
i12.3
i6.7
Expected
return on plan assets
(i18.0
)
(i8.4
)
Amortization
of net loss
i1.5
i1.0
Amortization
of prior service credit
(i0.4
)
(i0.5
)
Net
periodic benefit cost
$
i1.6
$
i2.7
/
Note
12 - iIncome Taxes
The Company computes its provision for income taxes by applying the estimated annual effective tax rate to year to date income before income taxes and equity in income of affiliated companies and adjusts for discrete tax items recorded in the period.
The
provision for income taxes for the three months ended September 30, 2019 is based on our projected annual effective tax rate for fiscal year 2020, adjusted for specific items that are required to be recognized in the period in which they are incurred.
Income tax expense for the three months ended September 30, 2019 is $i21.8 million
compared to $i21.7 million in the same period in 2018. The effective tax rate increased by i5.1%, from i17.8%
to i22.9%. The modest increase in income tax provision and the increase in the effective tax rate was primarily related to non-deductible restructuring and transaction costs and the increase of operating income earned in higher tax jurisdictions as a result of the Bemis acquisition.
Note 13
- iShareholders' Equity
i
The changes in ordinary and treasury shares during the three months ended September 30,
2019 and 2018 were as follows:
The
changes in the components of accumulated other comprehensive income (loss) during the three months ended September 30, 2019 and 2018 were as follows:
Foreign
Currency Translation
Net Investment Hedge
Pension
Effective Derivatives
Total Accumulated Other Comprehensive Income (Loss)
The
Company recorded a loss on the sale of the EC Remedy of $i8.8 million, which is the result of the reclassification of accumulated foreign currency translation amounts from accumulated other comprehensive income to earnings. Refer to Note 4, "Discontinued Operations"
for more information.
26
i
Note 14 - Segments
The
Company's business is organized and presented in the two reportable segments outlined below:
Flexibles: Consists of operations that manufacture flexible and film packaging in the food and beverage, medical and pharmaceutical, fresh produce, snack food, personal care, and other industries.
Rigid Packaging: Consists of operations that manufacture rigid plastic containers for a broad range of predominantly beverage and food products, including carbonated soft drinks, water, juices, sports drinks, milk-based beverages, spirits and beer, sauces, dressings, spreads and personal care items and plastic caps for a wide variety of applications.
Other consists
of the Company's equity method investments, including AMVIG, undistributed corporate expenses, intercompany eliminations and other business activities.
Operating segments are organized along the Company's product lines and geographical areas. In conjunction with the acquisition of Bemis, the Company reassessed its segment reporting structure in the first fiscal quarter of 2020 and elected to disaggregate the Flexibles Americas operating segment into Flexibles North America and Flexibles Latin America. The five Flexibles operating segments (Flexibles Europe, Middle East and Africa; Flexibles North America, Flexibles Latin
America; Flexibles Asia Pacific and Specialty Cartons) have been aggregated in the Flexibles reporting segment as they exhibit similarity in long-term forecasted economic characteristics, similarity in the products they offer, their production technologies, the customers they serve, the nature of their service delivery models, and their regulatory environments.
In the fourth quarter of fiscal year 2019, in connection with the acquisition of Bemis, the Company changed its measure of segment performance from adjusted operating income to adjusted earnings before interest and tax ("EBIT") from continuing operations. The Company's chief operating decision maker, the Global Management Team ("GMT"),
evaluates performance and allocates resources based on adjusted EBIT from continuing operations. The Company defines adjusted EBIT as operating income adjusted to eliminate the impact of certain items that the Company does not consider indicative of its ongoing operating performance and to include equity in income (loss) of affiliated companies. The GMT consists of the Managing Director and Chief Executive Officer and his direct reports and provides strategic direction and management oversight of the day to day activities of the Company.
The accounting policies of the reportable segments are the same as those in the consolidated
financial statements. The Company also has investments in operations in AMVIG that are accounted for under the equity method of accounting and, accordingly, those results are not included in segment net sales.
27
i
The
following table presents information about reportable segments:
Three Months Ended September 30,
($ in millions)
2019
2018
Sales
including intersegment sales
Flexibles
$
i2,430.8
$
i1,533.8
Rigid
Packaging
i710.6
i729.0
Other
i—
i—
Total
sales including intersegment sales
i3,141.4
i2,262.8
Intersegment
sales
Flexibles
i0.7
i0.4
Rigid
Packaging
i—
i—
Other
i—
i—
Total
intersegment sales
i0.7
i0.4
Net
sales
$
i3,140.7
$
i2,262.4
Adjusted
EBIT from continuing operations
Flexibles
$
i290.5
$
i157.5
Rigid
Packaging
i70.5
i68.3
Other
(i25.9
)
(i14.4
)
Adjusted
EBIT from continuing operations
i335.1
i211.4
Less:
Material restructuring programs (1)
(i17.3
)
(i10.1
)
Less:
Impairments in equity method investments (2)
i—
(i2.5
)
Less:
Material acquisition costs and other (3)
(i83.6
)
(i5.3
)
Less:
Amortization of acquired intangible assets from business combinations (4)
(i68.3
)
(i4.8
)
Add/(Less):
Economic net investment hedging activities not qualifying for hedge accounting (5)
i—
(i2.7
)
Less:
Impact of hyperinflation (6)
(i15.4
)
(i9.4
)
EBIT
from continuing operations
i150.5
i176.6
Interest
income
i6.7
i2.9
Interest
expense
(i59.7
)
(i56.3
)
Equity
in (income) loss of affiliated companies, net of tax
(i2.3
)
(i1.7
)
Income
from continuing operations before income taxes and equity in income (loss) of affiliated companies
$
i95.2
$
i121.5
(1)
Material
restructuring programs includes the 2018 Rigid Packaging Restructuring Plan and the 2019 Bemis Integration Plan for the three months ended September 30, 2019. For the three months ended September 30, 2018, material restructuring plans include the 2018 Rigid Packaging Restructuring Plan. Refer to Note 5, "Restructuring Plans," for more information about the Company's restructuring plans.
(2)
Impairments
in equity method investments includes the impairment charges related to other-than-temporary impairments related to the investment in AMVIG.
(3)
Material acquisition costs and other includes $i58.0 million of Bemis acquisition
related inventory fair value step-up and $i25.6 million of Bemis transaction related costs and integration costs not qualifying as exit costs.
(4)
Amortization of acquired
intangible assets from business combinations includes amortization expenses related to all acquired intangible assets from acquisitions impacting the periods presented, including $i25.9 million of sales backlog amortization in the fiscal first quarter of 2020 from the Bemis acquisition.
(5)
Economic
net investment hedging activities not qualifying for hedge accounting includes the exchange rate movements on external loans not deemed to be effective net investment hedging instruments resulting from the Company's conversion to U.S. GAAP from Australian Accounting Standards ("AAS") recognized in other non-operating income (loss), net.
/
(6)
Impact of hyperinflation includes the adverse impact of highly inflationary accounting for subsidiaries
in Argentina where the functional currency was the Argentine Peso.
28
The Company does not have sales to a single customer that exceed 10% of consolidated net sales for the three months ended September 30, 2019. Sales to PepsiCo., and its subsidiaries, accounted for approximately i12.1%
of net sales under multiple separate contractual agreements for the three months ended September 30, 2018. The Company sells to this customer in both the Rigid Packaging and the Flexibles reportable segments.
i
The following tables disaggregate net sales information by geography in which the Company operates
based on manufacturing or selling operation:
Three Months Ended September 30,
($ in millions)
2019
2018
North
America
$
i1,492.9
$
i772.2
Latin
America
i388.7
i263.3
Europe
i885.5
i885.2
Asia
Pacific
i373.6
i341.7
Net
sales
$
i3,140.7
$
i2,262.4
/
29
Note
15 - iEarnings Per Share Computations
The Company applies the two-class method when computing its earnings per share ("EPS"), which requires that net income per share for each class of share be calculated assuming all of the Company's net income is distributed
as dividends to each class of share based on their contractual rights.
i
Basic EPS is computed by dividing net income available to ordinary shareholders by the weighted-average number of ordinary shares outstanding after excluding the ordinary shares to be repurchased using forward contracts. Diluted EPS includes the effects of share options, restricted shares, performance rights, performance shares and share rights, if dilutive.
Three
Months Ended September 30,
(in millions, except per share amounts)
2019
2018
Numerator
Net
income attributable to Amcor plc
$
i66.0
$
i98.4
Distributed
and undistributed earnings attributable to shares to be repurchased
i—
(i0.2
)
Net
income available to ordinary shareholders of Amcor plc—basic and diluted
$
i66.0
$
i98.2
Net
income available to ordinary shareholders of Amcor plc from continuing operations—basic and diluted
$
i73.7
$
i98.2
Net
income available to ordinary shareholders of Amcor plc from discontinued operations—basic and diluted
$
(i7.7
)
$
i—
Denominator
Weighted-average
ordinary shares outstanding
i1,623.5
i1,156.5
Weighted-average
ordinary shares to be repurchased by Amcor plc
(i0.3
)
(i2.5
)
Weighted-average
ordinary shares outstanding for EPS—basic
i1,623.2
i1,154.0
Effect
of dilutive shares
i2.9
i4.7
Weighted-average
ordinary shares outstanding for EPS—diluted
i1,626.1
i1,158.7
Per
ordinary share income
Income from continuing operations
$
i0.05
$
i0.09
Income
from discontinued operations
(i0.01
)
i—
Basic
earnings per ordinary share
$
i0.04
$
i0.09
Income
from continuing operations
$
i0.05
$
i0.08
Income
from discontinued operations
(i0.01
)
i—
Diluted
earnings per ordinary share
$
i0.04
$
i0.08
/
Certain
outstanding share options were excluded from the diluted earnings per share calculation because they were anti-dilutive. The excluded share options represented an aggregate of i17.3 million and i7.6
million shares in the three months ended September 30, 2019 and 2018, respectively.
30
Note 16 - iContingencies
and Legal Proceedings
Contingencies
The Company's operations in Brazil are involved in various governmental assessments, principally related to claims for excise and income taxes. The Company does not believe that the ultimate resolution of these matters will materially impact the Company's consolidated results of operations, financial position or cash flows. Under customary local regulations, the Company's Brazilian
subsidiaries may need to post cash or other collateral if a challenge to any administrative assessment proceeds to the Brazilian court system; however, the level of cash or collateral already pledged or potentially required to be pledged would not significantly impact the liquidity of Amcor. At September 30, 2019 and June 30, 2019, the Company has recorded an accrual of $i15.3
million and $i16.4 million, respectively, included in other non-current liabilities in the unaudited condensed consolidated balance sheet and has estimated a reasonably possible loss exposure in excess of the accrual of $i25.5
million and $i23.7 million, respectively. The litigation process is subject to many uncertainties and the outcome of individual matters cannot be accurately predicted. The Company's assessments are based on its knowledge and experience, but the ultimate outcome of any of these matters may differ from the Company's estimates.
As
of September 30, 2019, Amcor provided letters of credit of $i42.2 million and deposited cash of $i13.1
million with the courts to continue to defend the cases.
Legal Proceedings
On April 18, 2019, prior to the closure of the Amcor and Bemis transaction, litigation funding firm, Burford Capital, notified Bemis on behalf of itwo shareholder funds (BCIM Strategic
Value Master Fund LP and BCIM SV SMA I LLC) that the funds would not accept the fixed exchange ratio for Amcor shares and instead intended to file a case asking a Missouri state court to appraise the value of their Bemis shares and compensate them accordingly. On June 24, 2019, the Burford funds sent a formal written demand for payment of the fair value of the funds’ shares. On September 6, the Burford funds filed a Petition for Appraisal of Stock in the Missouri court. As the Company is in the very early stages of this proceeding, it is difficult to predict the potential outcome.
iTwo
lawsuits brought by purported holders of Bemis stock against Bemis and Bemis directors and officers are pending in federal court in the U.S. District Court for the Southern District of New York, in which plaintiffs are seeking damages for alleged violations of the Exchange Act of 1934 and U.S. Securities and Exchange Commission rules and regulations. Plaintiffs allege a failure to disclose adequately information in the proxy statement issued in connection with the Amcor-Bemis merger. The cases are: Dixon, et al. v. Bemis Company, Inc. et al. and Stein v. Bemis Company, Inc. et al., which were instituted on April 15, 2019 and April 17, 2019, respectively.
In addition, a purported holder
of Bemis stock filed a putative derivative suit in the Cole County Circuit Court, Nineteenth Judicial District of Missouri, against Bemis directors and Amcor, alleging that the directors breached fiduciary duties in connection with the Amcor-Bemis merger and that Amcor aided and abetted breaches of fiduciary duty. The case is Scarantino, et al. v. Amcor Limited, et al., which was instituted on April 19, 2019.
Amcor intends to defend the claims made in the pending actions. It is too early for Amcor to provide any reliable assessment of the likely quantum of any damages that may become payable if its defense is unsuccessful in whole or in part. Although it is not possible at present to establish a reliable assessment of damages, there can be no assurance that any damages that may be
awarded will not be material to the results of operations or financial condition of Amcor.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis should be read in conjunction with the Financial Statements and Notes to Condensed Consolidated Financial Statements.
Summary of Financial Results
Three
Months Ended September 30,
($ in millions, except per share amounts)
2019
2018
Net sales
$
3,140.7
100.0
%
$
2,262.4
100.0
%
Cost
of Sales
(2,594.0
)
(82.6
%)
(1,868.6
)
(82.6
%)
Gross
profit
546.7
17.4
%
393.8
17.4
%
Operating
expenses:
Selling, general, and administrative expenses
(371.9
)
(11.8
%)
(198.3
)
(8.8
%)
Research
and development expenses
(25.9
)
(0.8
%)
(14.2
)
(0.6
%)
Restructuring and related expenses
(17.6
)
(0.6
%)
(12.5
)
(0.6
%)
Other
income, net
9.3
0.3
%
8.7
0.4
%
Operating
income
140.6
4.5
%
177.5
7.8
%
Interest
income
6.7
0.2
%
2.9
0.1
%
Interest expense
(59.7
)
(1.9
%)
(56.3
)
(2.5
%)
Other
non-operating income (loss), net
7.6
0.2
%
(2.6
)
(0.1
%)
Income
from continuing operations before income taxes and equity in income (loss) of affiliated companies
95.2
3.0
%
121.5
5.4
%
Income
tax expense
(21.8
)
(0.7
%)
(21.7
)
(1.0
%)
Equity in income (loss) of affiliated companies
2.3
0.1
%
1.7
0.1
%
Income
from continuing operations
75.7
2.4
%
101.5
4.5
%
Income
(loss) from discontinued operations
(7.7
)
(0.2
%)
—
—
%
Net
income
$
68.0
2.2
%
$
101.5
4.5
%
Net
(income) loss attributable to non-controlling interests
(2.0
)
(0.1
%)
(3.1
)
(0.1
%)
Net
income attributable to Amcor plc
$
66.0
2.1
%
$
98.4
4.3
%
32
Overview
Amcor
is a global packaging company with total sales of approximately $9.5 billion in fiscal year 2019. We employ approximately 50,000 people across approximately 250 sites in more than 40 countries, and are a leader in developing and producing a broad range of packaging products including flexible and rigid packaging, specialty cartons and closures. In fiscal year 2019, the majority of sales were made to the defensive food, beverage, pharmaceutical, medical device home and personal care, and other consumer goods end markets.
Significant Items Affecting the Periods Presented
The
Acquisition of Bemis Company, Inc.
On June 11, 2019, we completed the acquisition of 100% of the outstanding shares of Bemis Company, Inc ("Bemis"), a global manufacturer of flexible packaging products based in the United States, for the purchase price of $5.2 billion in an all-stock transaction. In connection with the Bemis transaction, we assumed $1.4 billion of debt.
2019 Bemis Integration Plan
In connection with the acquisition of Bemis, we initiated restructuring activities in the fourth quarter of 2019 aimed at integrating and optimizing the combined
organization. As previously announced, we continue to target realizing approximately $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 Plan pre-tax restructuring costs are expected to be approximately $200 million. We estimate that approximately $150 million of the $200 million total costs will result in cash expenditures. Cash payments for the first quarter of fiscal year 2020 were $18 million, which includes $6.0 million of restructuring related expenditures. Cash payments of approximately $80 million
are expected for the balance of the fiscal year. The 2019 Bemis Integration Plan relates to the Flexibles segment and Corporate and is expected to be completed by the end of fiscal year 2022.
2018 Rigid Packaging Restructuring Plan
On August 21, 2018, we announced a restructuring plan in Amcor Rigid Packaging ("2018 Rigid Packaging Restructuring Plan") aimed at reducing structural costs and optimizing the footprint. The Plan includes the closures of manufacturing facilities and headcount reductions to achieve manufacturing footprint optimization and productivity improvements as well as overhead cost reductions.
Our total Plan pre-tax restructuring
costs are expected to be approximately $95 million with the main component being the cost to exit manufacturing facilities and employee related costs. We estimate that approximately $65 million of the $95 million total costs will result in cash expenditures. Cash payments for the first quarter of fiscal year 2020 were $3.0 million, with $15 million to $20 million expected during the remainder of the fiscal year. The Plan is expected to be materially completed during this fiscal year.
High Inflation 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 its Argentinean 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 first fiscal quarter of 2020 resulted in a negative impact of $15.4 million in foreign currency transaction losses that was reflected on the unaudited condensed consolidated statement of
income.
33
Results of Operations - First Quarter 2020
Consolidated Results of Operations
Three
Months Ended September 30,
($ in millions)
2019
2018
Net sales
$
3,140.7
$
2,262.4
Operating
income
140.6
177.5
Operating profit as a percentage of net sales
4.5
%
7.8
%
Net
income attributable to Amcor plc
$
66.0
$
98.4
Diluted EPS
$
0.04
$
0.08
Net
sales increased$878.3 million, or 38.8%, to $3,140.7 million for the three months ended September 30, 2019, from $2,262.4 million for the three months ended September 30, 2018. Including Bemis net sales for the same period and adjusting for both EC and U.S. Remedy impacts would add net sales of $961.1 million leading to a combined sales for the three months ended September 30, 2018 of $3,223.5 million. Excluding negative currency impacts of $50.8 million, or (1.6%), the decrease in net sales for the three
months ended September 30, 2019 was $32.0 million, or (1.0%), driven by unfavorable volumes of (0.4%) and all other drivers including pricing, pass-through of lower raw material costs and mix of (0.6%).
Net income attributable to Amcor plc decreased$32.4 million, or 32.9%, to $66.0 million for the three months ended September 30, 2019, from $98.4 million for the three months ended September 30, 2018 mainly as a result
of the Bemis related acquisition, transaction and integration cost impacts.
Diluted EPS decreased to $0.04 for the three months ended September 30, 2019, from $0.08 for the three months ended September 30, 2018, with the net income attributable to ordinary shareholders of Amcor plc decreasing by 32.9% and the diluted weighted average number of shares outstanding increasing 40.3% for three months ended September 30, 2019
compared to three months ended September 30, 2018. The increase in the diluted weighted average number of shares outstanding was due to the acquisition of Bemis.
Segment Results of Operations
Flexibles Segment
Our Flexibles reporting segment develops and supplies flexible packaging globally.
Three
Months Ended September 30,
($ in millions)
2019
2018
Net sales including intersegment sales
$
2,430.8
$
1,533.8
Adjusted
EBIT from continuing operations
290.5
157.5
Adjusted EBIT from continuing operations as a percentage of net sales
12.0
%
10.3
%
Net
sales including intersegment sales increased $897.0 million, or 58.5%, to $2,430.8 million for the three months ended September 30, 2019, from $1,533.8 million for the three months ended September 30, 2018. Including Bemis net sales including intersegment sales for the same period and adjusting for both EC and U.S. Remedy impacts would add net sales of $962.9 million leading to a combined net sales including intersegment sales for the three months ended September 30, 2018 of $2,496.7 million. Excluding negative currency impacts of $47.0 million, or (1.9%), the decrease in net sales for the three months ended September 30, 2019 was $18.9 million, or (0.7%), driven by unfavorable volumes of (0.6%) and all other drivers including pricing, raw material pass-through and mix of
(0.1%).
Adjusted earnings before interest and tax from continuing operations ("Adjusted EBIT") increased $133.0 million, or 84.4%, to $290.5 million for the three months ended September 30, 2019, from $157.5 million for the three months ended September 30, 2018. Including Bemis Adjusted EBIT for the same period and adjusting for both EC and U.S. Remedy impacts would add Adjusted EBIT of $114.1 million leading to a combined Adjusted EBIT for the three months ended September 30, 2018 of $271.6 million. Excluding negative currency impacts of $4.2 million, or (1.5%), the increase in EBIT for the three
34
months
ended September 30, 2019 was $23.1 million or 8.5%, driven by plant cost improvements of 8.4%, SG&A and other cost improvements of 2.4% partially offset by unfavorable volume contribution of (2.3%).
Rigid Packaging Segment
Our Rigid Packaging reporting segment is one of the world's largest manufacturers of rigid packaging containers and related products.
Three
Months Ended September 30,
($ in millions)
2019
2018
Net sales including intersegment sales
$
710.6
$
729.0
Adjusted
EBIT from continuing operations
70.5
68.3
Adjusted EBIT from continuing operations as a percentage of net sales
9.9
%
9.4
%
Net
sales including intersegment sales decreased $18.4 million, or (2.5%), to $710.6 million for the three months ended September 30, 2019, from $729.0 million for the three months ended September 30, 2018. Excluding negative currency impacts of $3.8 million, or (0.5%), the decrease in net sales including intersegment sales for the three months ended September 30, 2019 was $14.6 million, or (1.8%), driven by unfavorable pass-through of lower raw material costs of (0.9%) and unfavorable mix of (0.9%).
Adjusted EBIT increased $2.2 million, or 3.2%, to $70.5 million for the three months ended September 30, 2019, from $68.3 million for the three months ended September 30,
2018. Excluding negative currency impacts of $0.1 million, or (0.1%), the increase in Adjusted EBIT for the three months ended September 30, 2019 was $2.3 million, or 3.3%, driven by plant cost improvements of 6.3%, volume/price improvements of 1.6%, and SG&A and other cost improvements of 1.8% partially offset by unfavorable mix contribution of (6.4%).
Consolidated Gross Profit
Three
Months Ended September 30,
($ in millions)
2019
2018
Gross profit
$
546.7
$
393.8
Gross
profit as a percentage of net sales
17.4
%
17.4
%
Gross profit increased by $152.9 million, or 38.8%, to 546.7 million for the three months ended September 30, 2019, from $393.8
million for the three months ended September 30, 2018. The increase was primarily driven in the Flexibles reporting segment by the Bemis acquisition.
Consolidated Selling, General and Administrative ("SG&A") Expense
Three Months Ended September 30,
($
in millions)
2019
2018
SG&A expenses
$
(371.9
)
$
(198.3
)
SG&A
expenses as a percentage of net sales
(11.8
%)
(8.8
%)
SG&A expenses increased by $173.6 million, or 87.5%, to $371.9 million for the three months ended September 30, 2019,
from $198.3 million for the three months ended September 30, 2018. The increase was primarily driven in the Flexibles reporting segment by the Bemis related acquisition, transaction and integration cost impacts.
Consolidated Research and Development ("R&D") Expense
Three
Months Ended September 30,
($ in millions)
2019
2018
R&D expenses
$
(25.9
)
$
(14.2
)
R&D
expenses as a percentage of net sales
(0.8
%)
(0.6
%)
35
Research and development costs increased$11.7 million, or 82.4%,
for the three months ended September 30, 2019, from $14.2 million for the three months ended September 30, 2018. The increase was primarily driven by the addition of the Bemis cost base and timing of project costs.
Consolidated Restructuring and Related Expense
Three
Months Ended September 30,
($ in millions)
2019
2018
Restructuring and related expenses
$
(17.6
)
$
(12.5
)
Restructuring
and related expenses as a percentage of net sales
(0.6
%)
(0.6
%)
Restructuring and related expense increased by $5.1 million, or 40.8%, to $17.6 million for the three months ended September 30, 2019,
from $12.5 million for the three months ended September 30, 2018. The increase was primarily driven by restructuring activities in connection with the Rigid Packaging Restructuring Program and integration activities in connection with the Bemis transaction.
Consolidated Other Income, Net
Three
Months Ended September 30,
($ in millions)
2019
2018
Other income, net
$
9.3
$
8.7
Other
income, net, as a percentage of net sales
0.3
%
0.4
%
Other income, net increased by $0.6 million, or 6.9%, to $9.3 million for the three months ended September 30, 2019, from
$8.7 million for the three months ended September 30, 2018 mainly driven by foreign exchange movements.
Consolidated Interest Income
Three Months Ended September 30,
($ in millions)
2019
2018
Interest
income
$
6.7
$
2.9
Interest income as a percentage of net sales
0.2
%
0.1
%
Interest
income increased by $3.8 million, or 131.0%, to $6.7 million for the three months ended September 30, 2019, from $2.9 million for the three months ended September 30, 2018 driven by increased cash balances in subsidiary operations.
Consolidated Interest Expense
Three
Months Ended September 30,
($ in millions)
2019
2018
Interest expense
$
(59.7
)
$
(56.3
)
Interest
expense as a percentage of net sales
(1.9
%)
(2.5
%)
Interest expense increased by $3.4 million or 6.0%, to $59.7 million for the three months ended September 30, 2019, from $56.3 million
for the three months ended September 30, 2018. The increase was primarily driven by the addition of the Bemis debt portfolio as a result of the Bemis acquisition offset by lower overall funding costs.
Consolidated Other Non-Operating Income (Loss), Net
Three Months Ended September 30,
($
in millions)
2019
2018
Other non-operating income (loss), net
$
7.6
$
(2.6
)
Other
non-operating income (loss), net, as a percentage of net sales
0.2
%
(0.1
%)
36
Other non-operating income (loss), net increased by $10.2 million to
a $7.6 million gain for the three months ended September 30, 2019, from a $2.6 million loss for the three months ended September 30, 2018 mainly driven by favorable pension impacts.
Consolidated Income Tax Expense
Three
Months Ended September 30,
($ in millions)
2019
2018
Income tax expense
$
(21.8
)
$
(21.7
)
Effective
income tax rate
22.9
%
17.8
%
Provision for income taxes for the three months ended September 30, 2019 totaled $21.8 million, resulting in an effective tax rate of 22.9%. Provision for income taxes for the three months ended September 30,
2018 totaled $21.7 million, resulting in an effective tax rate of 17.8%.
The modest increase in income tax provision and the increase in the effective tax rate was primarily related to non-deductible restructuring and transaction costs and the increase of operating income earned in higher tax jurisdictions as a result of the Bemis acquisition.
The effective tax rate from continuing operations was 22% for the three months ended September 30, 2019.
37
Presentation
of Non-GAAP Information
This Quarterly Report on Form 10-Q refers to non-GAAP financial measures: adjusted earnings before interest and taxes ("EBIT") from continuing operations, adjusted net income from continuing operations, and net debt. These non-GAAP financial measures adjust for factors that are unusual or unpredictable. These measures exclude the impact of significant tax reform, 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, certain litigation matters, and certain acquisition-related expenses, including transaction expenses, due diligence expenses, professional and legal fees, purchase
accounting adjustments for inventory and order backlog 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"). Management of the Company uses the non-GAAP measures to evaluate operating performance and believes that these non-GAAP measures are useful to enable investors to perform comparisons of current and historical performance of the Company.
A reconciliation of reported net income attributable to Amcor plc to adjusted EBIT from continuing operations and adjusted net income from continuing operations
for the three months ended September 30, 2019 and 2018 is as follows:
Three Months Ended September 30,
($ in millions)
2019
2018
Net
income attributable to Amcor plc, as reported
$
66.0
$
98.4
Add: Net income (loss) attributable to non-controlling interests
2.0
3.1
Less:
(Income) loss from discontinued operations, net of tax
7.7
—
Income from continuing operations
75.7
101.5
Add:
Income tax expense
21.8
21.7
Add: Interest expense
59.7
56.3
Less:
Interest income
(6.7
)
(2.9
)
EBIT from continuing operations
150.5
176.6
Add:
Material restructuring programs (1)
17.3
10.1
Add: Impairments in equity method investments (2)
—
2.5
Add:
Material acquisition costs and other (3)
83.6
5.3
Add: Amortization of acquired intangible assets from business combinations (4)
68.3
4.8
Add/(Less):
Economic net investment hedging activities not qualifying for hedge accounting (5)
—
2.7
Add: Impact of hyperinflation (6)
15.4
9.4
Adjusted
EBIT from continuing operations
335.1
211.4
Less: Income tax expense
(21.8
)
(21.7
)
Add:
Adjustments to income tax expense (7)
(40.2
)
(5.2
)
Less: Interest expense
(59.7
)
(56.3
)
Add:
Interest income
6.7
2.9
Less: Net (income) loss attributable to non-controlling interests
(2.0
)
(3.1
)
Adjusted
net income from continuing operations
$
218.1
$
128.0
(1)
Material restructuring programs includes the 2018 Rigid Packaging Restructuring Plan and the 2019 Bemis Integration Plan for the three months ended September 30,
2019. For the three months ended September 30, 2018, material restructuring plans include the 2018 Rigid Packaging Restructuring Plan. Refer to Note 5, "Restructuring Plans," for more information about our restructuring plans.
(2)
Impairments in equity method investments includes the impairment charges related to other-than-temporary impairments related to the investment in AMVIG.
(3)
Material
acquisition costs and other includes $58.0 million of Bemis acquisition related inventory fair value step-up and $25.6 million of Bemis transaction related costs and integration costs not qualifying as exit costs.
(4)
Amortization of acquired intangible assets from business combinations includes amortization expenses related to all acquired intangible assets from acquisitions impacting the periods presented, including $25.9 million of sales backlog amortization in the fiscal first quarter of 2020 from the Bemis acquisition.
38
(5)
Economic
net investment hedging activities not qualifying for hedge accounting includes the exchange rate movements on external loans not deemed to be effective net investment hedging instruments resulting from the our conversion to U.S. GAAP from Australian Accounting Standards ("AAS") recognized in other non-operating income (loss), net.
(6)
Impact of hyperinflation includes the adverse impact of highly inflationary accounting for subsidiaries in Argentina where the functional currency was the Argentine Peso.
We finance our business primarily through cash flows provided by operating activities, borrowings from banks and proceeds from issuances of debt and equity. We periodically review our capital structure and liquidity position in light of market conditions, expected future cash flows, potential funding requirements for debt refinancing, capital expenditures and acquisitions, the cost of capital, sensitivity analyses reflecting downside scenarios, the impact on our financial metrics and credit ratings, and our ease of access to funding sources. Based on our current cash flow from operating activities and available cash, we believe our cash flows provided by operating activities, together with borrowings available under our credit facilities, will provide sufficient liquidity to fund our operations, capital expenditures and other commitments.
Overview
Three
Months Ended September 30,
($ in millions)
2019
2018
Change
1Q 2020 vs. 1Q 2019
Cash flow from operating activities
$
(89.4
)
$
(305.8
)
$
216.4
Cash
flow from investing activities
284.1
(105.8
)
389.9
Cash flow from financing activities
(306.2
)
154.3
(460.5
)
Cash
Flow Overview
Cash Flow from Operating Activities
Net cash outflowsused in operating activities decreased by $216.4 million, or 70.8%, to $89.4 million for the three months ended September 30, 2019, from $305.8 million for the three months ended September 30, 2018. This decrease was primarily due to impacts from the Bemis acquisition
and improvements in working capital management.
Cash Flow from Investing Activities
Net cash inflowsprovided by investing activities increased by $389.9 million, or 368.5%, to $284.1 million for the three months ended September 30, 2019, from a $105.8 million outflow for the three months ended September 30,
2018. This increase was primarily due to disposal proceeds from the EC and U.S. Remedies related to the Bemis acquisition.
Cash Flow from Financing Activities
Net cash flows used in financing activities decreased by $460.5 million, or 298.4%, to $306.2 million for the three months ended September 30, 2019, from a $154.3 million inflow for the three months ended September 30,
2018. This decrease was primarily due to the repayment of the $400.0 million, 6.80%, Bemis Notes.
Net Debt
We borrow money 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, except where we have the ability and intent to refinance, 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, 2019, we are
in compliance with all applicable covenants under our bank debt facilities and U.S. private placement debt.
40
Our net debt as of September 30, 2019 and June 30, 2019 was $5.3 billion and $5.5 billion, respectively, with the change being primarily due to proceeds received from the divestment of the EC Remedy on the August 8, 2019. Refer
to Note 3, "Acquisitions," for more information about the EC Remedy.
Available Financing
As of September 30, 2019, we had undrawn credit facilities available in the amount of $2.4 billion. Our senior facilities are available to fund working capital, growth capital expenditures and refinancing obligations and are provided to us by five separate bank syndicates. On September 25, 2019, we canceled $250.0 million of the $750.0 million term loan facility. As
of September 30, 2019, the revolving senior bank debt facilities had an aggregate limit of $5.3 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). Our senior facilities mature between fiscal years 2020 and 2024.
Dividend Payments
During the three months ended September 30, 2019, we declared a $0.12 cash dividend per ordinary
share.
Credit Rating
Our capital structure and financial practices have earned us investment grade credit ratings from two internationally recognized credit rating agencies. These credit ratings are important to our ability to issue debt at favorable rates of interest, for various tenors 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 21, 2019, our Board of Directors approved an on-market buy-back of $500
million of ordinary shares and Chess Depositary Instruments ("CDIs"). During the three months ended September 30, 2019, the Company repurchased approximately $58.2 million, or 5.8 million shares. The shares repurchased as part of the program were canceled upon repurchase.
We had cash outflows of $10.2 million and $21.2 million for the purchase of our shares in the open market during the three months ended September 30, 2019
and 2018, respectively, as treasury shares to satisfy the vesting and exercises of share-based compensation awards. As of September 30, 2019 and June 30, 2019, we held treasury shares at cost of $11.5 million and $16.1 million, representing 1.1 million and 1.4 million shares, respectively.
New Accounting
Pronouncements
Refer to Note 2, "New Accounting Guidance," in the Notes to Consolidated Financial Statements.
Critical Accounting Estimates and Judgments
Our discussion and analysis of our financial condition and results of operations is based on our 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. On an ongoing basis, management evaluates its estimates and judgments, including those related to pension costs, intangible assets and goodwill, deferred taxes, and equity accounted investments. 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 the our Annual Report on Form 10-K for the year ended June 30, 2019.
41
Item
3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the Company’s market risk during the three-month period ended September 30, 2019. For additional information, refer to Note 8, "Fair Value Measurements," and Note 9, "Derivative Instruments," to the notes to the Company's unaudited condensed consolidated financial statements and to "Item 7A. - Quantitative and Qualitative
Disclosures About Market Risk" of the Company’s Annual Report on Form 10-K for the year ended June 30, 2019.
Item 4. Controls and Procedures
As disclosed in our Annual Report on Form 10-K filed with the SEC on September 3, 2019, we identified two material weaknesses in our internal control over financial reporting during the conversion of our historical AAS financial statements to U.S. GAAP. The first material weakness was related to our lack of accounting staff and supervisory personnel
with the appropriate level of experience in technical accounting in U.S. GAAP and disclosure and filing requirements of a U.S. domestic registrant. We are currently in the process of remediating this material weakness and have taken numerous steps to address the underlying causes of the material weakness. We have hired additional financial reporting personnel with U.S. GAAP technical accounting and financial reporting experience, aligned our accounting policies and procedures with U.S. GAAP, enhanced our internal review procedures during the financial close process, and begun technical training for accounting and finance personnel.
We also identified a second material weakness arising from deficiencies in the design and operating effectiveness of internal controls over the period end reporting process. Specifically, we did not design and maintain effective controls to verify
that conflicting duties were appropriately segregated within key IT systems used in the preparation and reporting of financial information. We are currently in the process of remediating this material weakness by commencing a process to (i) identify those internal controls requiring improved documentation of independent review over the completeness and accuracy of financial information under U.S. GAAP, (ii) implement enhanced standards designed to meet the requirements of the Sarbanes-Oxley Act, (iii) review the design of applicable internal controls and assess any required amendments and (iv) increase the training of accounting and finance staff in relevant areas.
We believe that these enhanced resources and processes, including the implementation of new mitigating controls, will effectively remediate the material weaknesses, but the material weaknesses will not be considered
remediated until the revised controls operate for a sufficient period of time and we have concluded, through testing, that these controls are designed and operating effectively.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2019. 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. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving their control objectives.
As a result of the material weaknesses, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2019.
Changes in Internal Control Over Financial Reporting
Except as described above, 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 fiscal quarter of 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
42
Part
II - Other Information
Item 1. Legal Proceedings
The material set forth in Note 16, "Contingencies and Legal Proceedings," of the Notes to Consolidated Financial Statements is incorporated herein by reference.
Item 1A. Risk Factors
Information about our risk factors is
contained in "Item 1A - Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended June 30, 2019. We believe that at September 30, 2019, there has been no material change to this information.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Share repurchase activity during the three months ended September 30, 2019 were as follows (in millions, except number of shares, which are reflected in
thousands, and per share amounts):
Period
Total Number of Shares Purchased (2)
Average Price Paid Per Share (2)(3)
Total
Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Programs (1)
August 1 - 31, 2019
996
$
9.75
—
$
500.0
September
1 - 30, 2019
5,819
10.09
5,766
441.8
Total
6,815
$
10.04
5,766
$
441.8
(1)
On
August 20, 2019, our Board of Directors approved an on-market buy-back program of $500 million of ordinary shares and CHESS Depositary Instruments ("CDIs"). Board authorizations remain in effect until shares in the amount authorized thereunder have been repurchased.
(2)
Includes shares purchased on the open market to satisfy the vesting and exercises of share-based compensation awards.
(3)
Includes shares purchased on the open market to satisfy the vesting and
exercises of share-based compensation awards. The average price paid per share related to the $500 million buy-back program was $10.09. Average price paid per share excludes costs associated with the repurchase.
Item 3. Defaults Upon Senior Securities
Note applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not
applicable.
43
Item 6. Exhibits
Pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"), we have filed certain agreements as exhibits to this Quarterly Report on Form 10-Q. These agreements may contain representations and warranties by the parties thereto. These representations and warranties have been made solely for the benefit of the other party or parties to such agreements and (i) may have been qualified by
disclosures made to such other party or parties, (ii) were made only as of the date of such agreements or such other date(s) as may be specified in such agreements and are subject to more recent developments, which may not be fully reflected in our public disclosure, (iii) may reflect the allocation of risk among the parties to such agreements and (iv) may apply materiality standards different from what may be viewed as material to investors. Accordingly, these representations and warranties may not describe our actual state of affairs at the date hereof and should not be relied upon.
XBRL
Instance Document - the instance document does not appear in the Interactive Data file because its XBLR tags are embedded within the Inline XBRL document.
Cover Page Interactive File (formatted as Inline XBRL and contained in Exhibit 101).
Filed Electronically
44
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.