O-I Glass(OI) - 2022 Q1 - Quarterly Report

Part I — FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the first quarter Item 1. Financial Statements. This section presents the unaudited condensed consolidated financial statements, including the results of operations, comprehensive income, balance sheets, and cash flows, along with detailed notes providing additional context and breakdowns for segments, revenue, debt, contingencies, and other financial items Condensed Consolidated Results of Operations This section presents the company's net sales, gross profit, and earnings per share for the three months ended March 31, 2022 and 2021 | Metric | Three months ended March 31, 2022 (Millions) | Three months ended March 31, 2021 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net sales | $1,692 | $1,500 | | Gross profit | $304 | $244 | | Earnings (loss) before income taxes | $170 | $(65) | | Net earnings (loss) | $122 | $(91) | | Net earnings (loss) attributable to the Company | $88 | $(97) | | Basic earnings per share | $0.56 | $(0.62) | | Diluted earnings per share | $0.55 | $(0.62) | Condensed Consolidated Comprehensive Income (Loss) This section details the company's net earnings, foreign currency translation adjustments, and total comprehensive income or loss for the three months ended March 31, 2022 and 2021 | Metric | Three months ended March 31, 2022 (Millions) | Three months ended March 31, 2021 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net earnings (loss) | $122 | $(91) | | Foreign currency translation adjustments | $135 | $(85) | | Other comprehensive income (loss) | $156 | $(52) | | Total comprehensive income (loss) | $278 | $(143) | | Comprehensive income (loss) attributable to the Company | $239 | $(145) | Condensed Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity at March 31, 2022, December 31, 2021, and March 31, 2021 | Metric | March 31, 2022 (Millions) | December 31, 2021 (Millions) | March 31, 2021 (Millions) | | :-------------------------------- | :-------------------------- | :--------------------------- | :-------------------------- | | Cash and cash equivalents | $519 | $725 | $742 | | Trade receivables, net | $900 | $692 | $714 | | Inventories | $837 | $816 | $827 | | Total current assets | $2,490 | $2,519 | $2,486 | | Total assets | $8,877 | $8,832 | $8,825 | | Accounts payable | $1,169 | $1,210 | $998 | | Total current liabilities | $1,750 | $1,846 | $1,702 | | Long-term debt | $4,621 | $4,753 | $5,168 | | Share owners' equity | $1,102 | $827 | $262 | Condensed Consolidated Cash Flows This section outlines the cash flows from operating, investing, and financing activities, as well as the overall change in cash for the three months ended March 31, 2022 and 2021 | Metric | Three months ended March 31, 2022 (Millions) | Three months ended March 31, 2021 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Cash utilized in operating activities | $(73) | $(56) | | Cash utilized in investing activities | $(2) | $(31) | | Cash provided by (utilized in) financing activities | $(152) | $288 | | Effect of exchange rate fluctuations on cash | $21 | $(22) | | Change in cash | $(206) | $179 | | Cash at end of period | $519 | $742 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and breakdowns for various financial statement line items, including segment information, revenue, debt, and contingencies Note 1. Segment Information The Company operates in two reportable segments, Americas and Europe, which are aligned with its internal management structure. Segment operating profit, a non-GAAP measure, is used to evaluate performance and allocate resources. Both segments reported increased net sales and operating profit in Q1 2022 compared to Q1 2021 | Segment | Q1 2022 Net Sales (Millions) | Q1 2021 Net Sales (Millions) | Q1 2022 Segment Operating Profit (Millions) | Q1 2021 Segment Operating Profit (Millions) | | :------------------------ | :--------------------------- | :--------------------------- | :---------------------------------------- | :---------------------------------------- | | Americas | $940 | $837 | $129 | $100 | | Europe | $708 | $639 | $102 | $75 | | Reportable segment totals | $1,648 | $1,476 | $231 | $175 | - Segment operating profit is a non-GAAP measure used by management, including the CEO, to evaluate performance and allocate resources, and it includes an allocation of some corporate expenses[21] Note 2. Revenue Revenue is recognized when control of glass containers transfers to the customer, primarily upon shipment. The Company disaggregates its revenue by customer end use, with alcoholic beverages being the largest category - Revenue is recognized at the point of transfer of control of glass containers, which primarily occurs when products are shipped from the Company's facilities to the customer[24] | Customer End Use | Three months ended March 31, 2022 (Total Millions) | Three months ended March 31, 2021 (Total Millions) | | :----------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Alcoholic beverages | $1,111 | $979 | | Food and other | $324 | $327 | | Non-alcoholic beverages | $213 | $170 | | Reportable segment totals | $1,648 | $1,476 | | Other | $44 | $24 | | Net sales | $1,692 | $1,500 | Note 3. Credit Losses The Company manages credit risk through customer credit reviews, establishing credit limits, and monitoring balances. Trade receivables, net of allowances, increased to $900 million at March 31, 2022, from $714 million at March 31, 2021 - The Company assesses each customer's ability to pay by conducting a credit review, establishing credit limits, and monitoring ongoing credit exposure[26] | Metric | March 31, 2022 (Millions) | March 31, 2021 (Millions) | | :----------------------- | :-------------------------- | :-------------------------- | | Accounts receivable, net | $900 | $714 | | Allowance for doubtful accounts | $30 | $32 | Note 4. Inventories Total inventories increased slightly to $837 million at March 31, 2022, from $827 million at March 31, 2021, with finished goods representing the largest component | Inventory Class | March 31, 2022 (Millions) | December 31, 2021 (Millions) | March 31, 2021 (Millions) | | :---------------- | :-------------------------- | :--------------------------- | :-------------------------- | | Finished goods | $676 | $659 | $672 | | Raw materials | $121 | $119 | $119 | | Operating supplies | $40 | $38 | $36 | | Total | $837 | $816 | $827 | Note 5. Derivative Instruments The Company utilizes various derivative instruments, including foreign exchange options, forward contracts, interest rate swaps, and cross-currency swaps, to manage foreign exchange and interest rate risks. These instruments are classified as Level 2 in the fair value hierarchy - The Company uses derivatives to manage exposures to fluctuations in foreign currency exchange rates and interest rates, designating them as cash flow hedges, fair value hedges, or net investment hedges[30][32][33] | Type of Derivative | March 31, 2022 (Assets, Millions) | March 31, 2022 (Liabilities, Millions) | December 31, 2021 (Assets, Millions) | December 31, 2021 (Liabilities, Millions) | March 31, 2021 (Assets, Millions) | March 31, 2021 (Liabilities, Millions) | | :------------------------------------------ | :-------------------------------- | :----------------------------------- | :----------------------------------- | :------------------------------------- | :-------------------------------- | :----------------------------------- | | Interest rate swaps - fair value hedges | $0 | $20 | $4 | $2 | $13 | $0 | | Cash flow hedges of foreign exchange risk | $0 | $1 | $2 | $23 | $8 | $67 | | Fair value hedges of foreign exchange risk | $12 | $5 | $9 | $0 | $0 | $0 | | Net investment hedges | $2 | $15 | $3 | $17 | $2 | $39 | | Foreign exchange derivative contracts (not hedges) | $6 | $0 | $1 | $2 | $5 | $3 | | Total derivatives | $20 | $41 | $19 | $44 | $28 | $109 | - An unrecognized gain of $1 million related to cross-currency swaps at March 31, 2022, was included in Accumulated OCI and is expected to be reclassified into earnings within the next 12 months[31] Note 6. Restructuring Accruals Restructuring accruals decreased to $27 million at March 31, 2022, from $31 million at January 1, 2022, primarily due to cash payments for severance and related benefits. No major restructuring programs were in effect during these periods | Category | Balance at January 1, 2022 (Millions) | Net cash paid (Millions) | Balance at March 31, 2022 (Millions) | | :--------------- | :---------------------------------- | :----------------------- | :--------------------------------- | | Employee Costs | $20 | $(3) | $17 | | Asset Impairment | $0 | $0 | $0 | | Other Exit Costs | $11 | $(1) | $10 | | Total Restructuring | $31 | $(4) | $27 | - The Company manages and accounts for restructuring actions programmatically, separate from ongoing operations, and no major restructuring programs were in effect as of March 31, 2022 and 2021[42] Note 7. Pension Benefit Plans The net periodic pension cost for Q1 2022 remained consistent with Q1 2021, totaling $8 million for U.S. plans and $0 for Non-U.S. plans | Component | Q1 2022 (U.S., Millions) | Q1 2021 (U.S., Millions) | Q1 2022 (Non-U.S., Millions) | Q1 2021 (Non-U.S., Millions) | | :-------------------------- | :----------------------- | :----------------------- | :--------------------------- | :--------------------------- | | Service cost | $3 | $3 | $2 | $3 | | Interest cost | $9 | $10 | $6 | $5 | | Expected asset return | $(15) | $(21) | $(11) | $(11) | | Amortization of actuarial loss | $11 | $16 | $3 | $3 | | Net periodic pension cost | $8 | $8 | $0 | $0 | Note 8. Income Taxes The Company calculates its interim tax provision using the estimated annual effective tax rate (EAETR) methodology, which can be volatile due to discrete items and changes in earnings mix. The Company is currently contesting tax assessments in various jurisdictions, believing adequate provisions have been made, but acknowledges potential material impacts if settled adversely - The interim tax provision is calculated using the estimated annual effective tax rate (EAETR) methodology, which can experience significant volatility due to discrete items and changes in the mix of earnings across jurisdictions[45] - The Company is under income tax examination in several jurisdictions (e.g., Brazil, Canada, Colombia, France, Indonesia, Mexico, Peru) and is contesting assessments, believing adequate provisions have been made, but adverse settlements could materially impact financial results[46] Note 9. Debt Total long-term debt decreased to $4,647 million at March 31, 2022. The Company refinanced its credit agreement in March 2022, securing up to $2.8 billion in borrowings, and repurchased $238.2 million of senior notes in Q1 2022. The Company was in compliance with all debt covenants as of March 31, 2022 | Debt Type | March 31, 2022 (Millions) | December 31, 2021 (Millions) | March 31, 2021 (Millions) | | :------------------------------------ | :-------------------------- | :--------------------------- | :-------------------------- | | Revolving Loans | $100 | $0 | $292 | | Term Loan A | $946 | $923 | $1,068 | | Senior Notes (various maturities) | $3,192 | $3,460 | $3,433 | | Finance leases | $108 | $98 | $102 | | Other | $4 | $5 | $6 | | Total long-term debt | $4,647 | $4,791 | $5,309 | | Less amounts due within one year | $26 | $38 | $141 | | Long-term debt (net of current portion) | $4,621 | $4,753 | $5,168 | - On March 25, 2022, the Company refinanced its credit agreement, providing for up to $2.8 billion of borrowings, including term loans and revolving credit facilities, maturing in March 2027[48] - In Q1 2022, the Company repurchased $150.0 million of 5.875% Senior Notes due 2023 and $88.2 million of 6.625% Senior Notes due 2027, funded with cash on hand[55] - As of March 31, 2022, the Company was in compliance with all covenants and restrictions in the new credit agreement[52] Note 10. Contingencies Paddock Enterprises, LLC, a subsidiary, filed for Chapter 11 bankruptcy in January 2020 to resolve asbestos claims. An agreement in principle was reached in April 2021 to fund a trust with $610 million, providing permanent injunctive relief for the Company and its affiliates. The Plan of Reorganization was accepted by over 99% of voting asbestos claimants in April 2022, pending court approval - Paddock Enterprises, LLC voluntarily filed for Chapter 11 bankruptcy on January 6, 2020, to equitably and finally resolve all current and future asbestos claims, with O-I Glass and O-I Group not included in the filing[65] - An agreement in principle was reached in April 2021 to fund an asbestos settlement trust (Paddock Trust) with $610 million, which will provide permanent injunctive relief protecting the Company and its affiliates from asbestos claims[68] - The Plan of Reorganization was jointly filed in January 2022 and subsequently accepted by over 99% of voting asbestos claimants by April 25, 2022, with a confirmation hearing scheduled for May 16, 2022[71][73] - The Paddock support agreement liability of $625 million is recorded on the Company's March 31, 2022, Condensed Consolidated Balance Sheet[74] Note 11. Share Owners' Equity Share owners' equity increased to $1,102 million at March 31, 2022, from $827 million at January 1, 2022, primarily due to net earnings and other comprehensive income. The Company repurchased 0.8 million shares for $10 million in Q1 2022 under an anti-dilutive program | Component | Balance on January 1, 2022 (Millions) | Q1 2022 Activity (Millions) | Balance on March 31, 2022 (Millions) | | :-------------------------------- | :---------------------------------- | :-------------------------- | :--------------------------------- | | Common Stock | $2 | $0 | $2 | | Capital in Excess of Par Value | $3,090 | $(5) | $3,085 | | Treasury Stock | $(701) | $2 | $(699) | | Retained Earnings | $301 | $88 | $389 | | Accumulated Other Comprehensive Loss | $(1,972) | $151 | $(1,821) | | Non-controlling Interests | $107 | $39 | $146 | | Total Share Owners' Equity | $827 | $275 | $1,102 | - During Q1 2022, the Company repurchased 764,501 shares of its common stock for approximately $10 million as part of a $150 million anti-dilutive share repurchase program, with approximately $100 million remaining available[87][183] Note 12. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss improved to $(1,821) million at March 31, 2022, from $(1,972) million at January 1, 2022, primarily due to positive net effects of exchange rate fluctuations and changes in certain derivative instruments | Component | Balance on January 1, 2022 (Millions) | Change before Reclassifications (Millions) | Amounts Reclassified (Millions) | Translation Effect (Millions) | Balance on March 31, 2022 (Millions) | | :------------------------------------------ | :---------------------------------- | :--------------------------------------- | :------------------------------ | :---------------------------- | :--------------------------------- | | Net Effect of Exchange Rate Fluctuations | $(1,290) | $130 | $0 | $0 | $(1,160) | | Change in Certain Derivative Instruments | $(21) | $18 | $(15) | $0 | $(18) | | Employee Benefit Plans | $(661) | $(2) | $14 | $6 | $(643) | | Total Accumulated Other Comprehensive Loss | $(1,972) | $146 | $(1) | $6 | $(1,821) | Note 13. Other Income (Expense), Net Other income (expense), net, significantly improved to $51 million in Q1 2022 from $(156) million in Q1 2021, primarily driven by a $55 million gain on the sale of a divested business and the non-recurrence of a $154 million charge related to the Paddock support agreement liability | Item | Three months ended March 31, 2022 (Millions) | Three months ended March 31, 2021 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Gain on sale of divested business | $55 | $0 | | Charge related to Paddock support agreement liability | $0 | $(154) | | Intangible amortization expense | $(8) | $(9) | | Foreign currency exchange loss | $0 | $(2) | | Royalty income | $6 | $5 | | Other | $(2) | $4 | | Other income (expense), net | $51 | $(156) | Note 14. Earnings Per Share Basic earnings per share improved to $0.56 in Q1 2022 from a loss of $(0.62) in Q1 2021, and diluted earnings per share improved to $0.55 from $(0.62) over the same period | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net earnings (loss) attributable to the Company | $88 | $(97) | | Weighted average shares outstanding (thousands) | 155,849 | 157,571 | | Basic earnings per share | $0.56 | $(0.62) | | Diluted earnings per share | $0.55 | $(0.62) | - The diluted EPS computation for Q1 2022 excludes 1,576,542 weighted average shares due to their antidilutive effect, including options with exercise prices greater than the average market price[93] Note 15. Supplemental Cash Flow Information Cash income taxes paid increased to $23 million in Q1 2022 from $10 million in Q1 2021. Interest paid, including note repurchase premiums, rose to $64 million from $49 million. The use of factoring programs resulted in a $20 million decrease to cash from operating activities in Q1 2022, compared to an $8 million increase in Q1 2021 | Item | Three months ended March 31, 2022 (Millions) | Three months ended March 31, 2021 (Millions) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total income taxes paid in cash | $23 | $10 | | Interest paid in cash | $64 | $49 | | Receivables sold (factoring programs) | $461 | $444 | | Impact of factoring on operating cash flows | $(20) | $8 | Note 16. New Accounting Pronouncement The Company adopted ASU No. 2020-04, 'Reference Rate Reform,' effective July 1, 2020, which had no material impact on its consolidated financial statements. No material portions of the Company's debt reference LIBOR as of March 31, 2022 - The adoption of ASU No. 2020-04, 'Reference Rate Reform,' effective July 1, 2020, had no material impact on the Company's consolidated balance sheet, results of operations, or cash flows[96] - As of March 31, 2022, no material portions of the Company's debt reference LIBOR[96] Note 17. COVID-19 Impacts The COVID-19 pandemic negatively impacted the Company's business in 2020, and to a lesser extent in 2021 and Q1 2022, with ongoing supply chain issues. While glass container manufacturing is essential, future impacts remain uncertain, though no material impact on key accounting estimates was observed in Q1 2022 or Q1 2021 - The COVID-19 pandemic negatively impacted the Company's business in 2020, and to a lesser extent in 2021 and the first three months of 2022, with ongoing broader supply chain issues[97][103] - There was no material impact to accounting estimates (allowance for doubtful accounts, inventory carrying value, goodwill, and other long-lived assets) in the Condensed Consolidated Financial Statements for Q1 2022 or Q1 2021[98] Note 18. Divestitures In March 2022, the Company completed the sale of its Cristar TableTop S.A.S. business for approximately $96 million, recording a pretax gain of $55 million. In January 2021, it sold a plant in Argentina for $10 million, with an immaterial gain - In March 2022, the Company completed the sale of its Cristar TableTop S.A.S. business for approximately $96 million, resulting in a pretax gain of $55 million[99] - In January 2021, the Company completed the sale of its plant in Argentina for approximately $10 million, with an immaterial gain[100] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on the Company's financial performance, condition, and future outlook for the first quarter of 2022 compared to 2021. It highlights key drivers of changes in net sales, earnings, and cash flows, discusses ongoing risks, and outlines strategic initiatives Executive Overview — Quarters ended March 31, 2022 and 2021 This overview highlights key financial performance drivers for Q1 2022 compared to Q1 2021, including net sales, earnings before income taxes, and segment operating profit - Net sales in Q1 2022 were $192 million (approximately 13%) higher than in Q1 2021, primarily due to higher prices and stronger shipments, despite negative impacts from foreign currency exchange rates and a divestiture[107] - Earnings before income taxes increased by $235 million in Q1 2022, driven by higher segment operating profit, a gain on divestiture, and the non-recurrence of the Paddock-related charge from Q1 2021[108] - Segment operating profit for reportable segments increased by $56 million (32%) in Q1 2022, attributed to higher sales and production, strong operating performance, margin expansion initiatives, and higher net prices[109] - Net interest expense increased by $15 million in Q1 2022, mainly due to higher note repurchase premiums and refinancing fees, partially offset by lower debt levels[111] Results of Operations — First Quarter of 2022 Compared with First Quarter of 2021 This section provides a detailed analysis of the Company's consolidated and segment-level financial performance for Q1 2022 compared to Q1 2021, breaking down changes in net sales, earnings before income taxes, segment operating profit, interest expense, income taxes, and net earnings attributable to non-controlling interests and the Company Net Sales This section analyzes the drivers of changes in net sales for the Americas and Europe segments, including price, volume, and foreign currency effects | Factor | Impact on Reportable Segment Net Sales (Millions) | | :-------------------------------- | :---------------------------------------------- | | Price | +$140 | | Sales volume and mix | +$73 | | Effects of changing foreign currency rates | $(37) | | Divestitures | $(4) | | Total effect on reportable segment net sales | +$172 | - Americas net sales increased by $103 million (12%), driven by higher selling prices ($80 million) and a 3.1% increase in glass container shipments, despite ongoing supply chain challenges[114] - Europe net sales increased by $69 million (11%), driven by a 9.9% increase in glass container shipments ($51 million) and higher selling prices ($60 million), partially offset by unfavorable foreign currency exchange rates ($42 million)[116] Earnings (loss) before Income Taxes and Segment Operating Profit This section details the factors influencing earnings before income taxes and segment operating profit, including net price, sales volume, operating costs, and foreign currency impacts | Factor | Impact on Reportable Segment Operating Profit (Millions) | | :------------------------------------------ | :----------------------------------------------------- | | Net price (net of cost inflation) | +$15 | | Sales volume and mix | +$17 | | Operating costs | +$26 | | Effects of changing foreign currency rates | +$1 | | Divestitures | $(3) | | Total net effect on reportable segment operating profit | +$56 | - Americas segment operating profit increased by $29 million (29%), benefiting from higher sales, selling prices exceeding cost inflation ($12 million net), and lower operating costs ($11 million), including the non-recurrence of a $40 million negative impact from severe weather in Q1 2021[120][121] - Europe segment operating profit increased by $27 million (36%), driven by higher shipments ($14 million), improved operating costs ($15 million), and selling prices exceeding cost inflation ($3 million)[123][124] - The conflict between Russia and Ukraine has caused significant increases and volatility in natural gas prices, posing a risk to the Company's European operations regarding energy supply and operating costs[125] Interest Expense, Net This section provides a breakdown of net interest expense, including note repurchase premiums and refinancing fees, for the first quarters of 2022 and 2021 | Metric | Three months ended March 31, 2022 (Millions) | Three months ended March 31, 2021 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net interest expense | $66 | $51 | | Note repurchase premiums and refinancing fees | $18 | $0 | Provision for Income Taxes This section explains the effective tax rates for Q1 2022 and Q1 2021, highlighting factors such as capital gains and the Paddock charge | Period | Effective Tax Rate | | :----- | :----------------- | | Q1 2022 | 28.2% | | Q1 2021 | (40.0%) | - The change in effective tax rate was due to a favorable capital gains tax rate on the sale of the tableware business in Q1 2022 and the non-tax-benefited Paddock charge in Q1 2021, as well as a change in the mix of geographic earnings[127] Net Earnings Attributable to Non-Controlling Interests This section details the net earnings attributable to non-controlling interests for Q1 2022 and Q1 2021, primarily driven by a gain on divestiture | Period | Net Earnings Attributable to Non-Controlling Interests (Millions) | | :----- | :-------------------------------------------------------------- | | Q1 2022 | $34 | | Q1 2021 | $6 | - The increase was primarily due to approximately $29 million of non-controlling interest recorded in Q1 2022 associated with the gain on the sale of the Company's glass tableware business in Colombia[128] Net Earnings (Loss) Attributable to the Company This section presents the net earnings or loss attributable to the company and diluted earnings per share for Q1 2022 and Q1 2021, along with significant impacting items | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net earnings (loss) attributable to the Company | $88 | $(97) | | Diluted earnings per share | $0.55 | $(0.62) | | Description | Q1 2022 Impact (Millions) | Q1 2021 Impact (Millions) | | :------------------------------------------ | :------------------------ | :------------------------ | | Gain on sale of divested business | $55 | $0 | | Charges for note repurchase premiums and write-off of finance fees | $(18) | $0 | | Charge related to Paddock support agreement liability | $0 | $(154) | | Net provision for income tax on items above | $(10) | $0 | | Net impact of noncontrolling interests on items above | $(29) | $0 | | Total | $(2) | $(154) | Forward Looking Operational and Financial Impacts The Company anticipates full-year 2022 sales shipment growth of at least 1%, continued margin expansion, and higher selling prices to offset cost inflation. Strategic priorities include advancing MAGMA deployment, completing divestitures, and finalizing the Paddock Chapter 11 reorganization. Cash from operations is expected to be at least $725 million, with capital expenditures around $600 million - The Company expects full-year 2022 sales shipment growth (in tons) to increase up to or exceed 1% compared to 2021, with continued benefits from margin expansion initiatives and higher selling prices offsetting cost inflation[134] - Strategic priorities include advancing MAGMA deployment, completing the strategic and tactical divestiture program (with proceeds funding capital expenditures and debt reduction), and completing the Paddock Chapter 11 reorganization and funding the related $610 million trust in 2022[134] - Cash provided by continuing operating activities is expected to be at least $725 million in 2022, with capital expenditures estimated at approximately $600 million[134] - The Company continues to actively monitor the impacts of the COVID-19 pandemic and the conflict between Russia and Ukraine, which could materially affect its operations[134] Items Excluded from Reportable Segment Totals This section details specific financial items that are excluded from segment operating profit to provide a clearer view of ongoing operational performance, including retained corporate costs, gains from divestitures, and charges related to the Paddock support agreement Retained Corporate Costs and Other This section details the retained corporate costs and other expenses, highlighting the increase in Q1 2022 due to R&D and incentive expenses | Period | Retained Corporate Costs and Other (Millions) | | :----- | :------------------------------------------ | | Q1 2022 | $50 | | Q1 2021 | $35 | - The increase in Q1 2022 was primarily due to additional research and development expenses related to MAGMA and higher management incentive expense[133] Gain on Sale of Divested Business This section reports the pretax gain recognized from the sale of the Cristar TableTop S.A.S. business in Q1 2022 - A pretax gain of approximately $55 million was recorded in Q1 2022 from the sale of the Cristar TableTop S.A.S. business[135] Charge for Paddock Support Agreement Liability This section explains the $154 million charge related to the Paddock support agreement liability recorded in Q1 2021 - A $154 million charge related to the Paddock support agreement liability was recorded in Q1 2021, primarily due to an increase in Paddock's asbestos reserve estimate for the channeling injunction[136] Capital Resources and Liquidity The Company refinanced its credit agreement in March 2022, securing up to $2.8 billion in borrowings and maintaining $1,140 million in unused credit. It also repurchased $238.2 million in senior notes. The Company expects sufficient cash flows from operations and available credit to meet its short-term and long-term obligations - On March 25, 2022, the Company's subsidiaries entered into a new Credit Agreement and Syndicated Facility Agreement, refinancing the previous agreement and providing for up to $2.8 billion of borrowings[138] - As of March 31, 2022, the Company had unused credit of $1,140 million available under the new Agreement, with a weighted average interest rate of 2.12% on outstanding borrowings[139] - The Company repurchased $150.0 million of 5.875% Senior Notes due 2023 and $88.2 million of 6.625% Senior Notes due 2027 in Q1 2022, funded with cash on hand[145] - The Company was in compliance with all covenants and restrictions in the Agreement as of March 31, 2022, and believes its ability to borrow funds will not be adversely affected[142] Material Cash Requirements This section confirms no material changes to the company's cash requirements from the prior annual report - There have been no material changes to the Company's material cash requirements at March 31, 2022, from those described in its Annual Report on Form 10-K for the year ended December 31, 2021[149] Cash Flows This section analyzes cash flows from operating, investing, and financing activities, including the impact of working capital and capital expenditures | Activity | Three months ended March 31, 2022 (Millions) | Three months ended March 31, 2021 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Cash utilized in operating activities | $(73) | $(56) | | Cash utilized in investing activities | $(2) | $(31) | | Cash provided by (utilized in) financing activities | $(152) | $288 | - Working capital was a $259 million use of cash in Q1 2022, compared to a $229 million use in Q1 2021, primarily due to higher accounts receivable[151] - Capital spending for property, plant and equipment was $96 million in Q1 2022, with full-year 2022 capital expenditures estimated at approximately $600 million[152] - Cash proceeds of approximately $96 million were received in Q1 2022 from the sale of the Company's glass tableware business in Colombia[153] Critical Accounting Estimates The Company's financial statements are prepared using estimates and assumptions that are continuously evaluated. No material changes in critical accounting estimates were reported at March 31, 2022, compared to the 2021 Form 10-K - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, which are evaluated on an ongoing basis[158] - There have been no material changes in critical accounting estimates at March 31, 2022, from those described in the Company's Annual Report on Form 10-K for the year ended December 31, 2021[160] Forward-Looking Statements This section highlights that the document contains forward-looking statements, which are subject to various risks and uncertainties, including the Paddock bankruptcy resolution, COVID-19 impacts, capital structure management, and geopolitical events like the Russia-Ukraine conflict. The Company does not undertake to update these statements - Forward-looking statements are subject to various factors including the approval of the Paddock Plan, actions of bankruptcy participants, COVID-19 impacts, capital availability, geopolitical conditions (e.g., Russia-Ukraine conflict), and supply chain disruptions[162][163] - The Company does not assume any obligation to update or supplement any particular forward-looking statements contained in this document[164] Item 3. Quantitative and Qualitative Disclosures About Market Risk. No material changes in market risk were reported at March 31, 2022, from those described in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes in market risk at March 31, 2022, from those described in the Company's Annual Report on Form 10-K for the year ended December 31, 2021[165] Item 4. Controls and Procedures. The Company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2022. No material changes in internal control over financial reporting occurred during the quarter, despite workplace modifications due to the COVID-19 pandemic - The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2022[167] - There have been no material changes in the Company's internal control over financial reporting during the fiscal quarter ended March 31, 2022, despite modifications to workplace practices due to the COVID-19 pandemic[169] PART II — OTHER INFORMATION This section provides additional information beyond the financial statements, including legal proceedings, updated risk factors, equity security sales, and exhibits Item 1. Legal Proceedings. No environmental proceedings requiring disclosure (monetary sanctions above $1 million) were pending or contemplated as of March 31, 2022. Further information on legal proceedings, particularly asbestos-related, is incorporated by reference from Note 10 to the financial statements - No environmental proceedings that may result in monetary sanctions above $1 million were pending or contemplated as of March 31, 2022[171] - Further information on legal proceedings is provided in Note 10 to the Condensed Consolidated Financial Statements[172] Item 1A. Risk Factors. This section updates risk factors, highlighting increased energy costs and availability risks due to the Russia-Ukraine conflict, potential labor shortages and cost increases, and delays in new glass melting technologies (MAGMA program) due to supply chain challenges Energy Costs or Availability This section covers energy costs or availability - Higher energy costs worldwide and interrupted power supplies, including as a result of the current conflict between Russia and Ukraine, may have a material adverse effect on the Company's consolidated assets or operations[174] - The Russia-Ukraine conflict has caused a significant increase in natural gas prices and volatility, posing a risk to European operations' energy supply and costs, potentially leading to increased operating costs or temporary/permanent plant cessations[175][176] Labor This section covers labor - Approximately 74% of the Company's employees directly associated with its operations in the U.S. and Canada are covered by collective bargaining agreements, with the principal agreement extended beyond March 31, 2022[177][178] - Labor shortages and increased competition in the labor market, exacerbated by the COVID-19 pandemic, could result in higher compensation costs or significant disruptions to operations[180] New Glass Melting Technologies This section covers new glass melting technologies - The MAGMA program, aimed at improving glass melting technology to reduce capital, enhance operational flexibility, increase recycled glass use, and lower carbon emissions, faces delays due to current supply chain challenges[181] - Inability to continue improving glass melting technology could affect the Company's competitiveness and its ability to transition to lower-carbon processes[181] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. During Q1 2022, the Company repurchased 764,501 shares of its common stock for approximately $10 million under a $150 million anti-dilutive share repurchase program, with $100 million remaining available | Period | Total Number of Shares Purchased | Average Price Paid per Share | 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 Plans or Programs (in millions) | | :--------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------- | :--------------------------------------------------------------------------------------------------- | | January 1 - January 31, 2022 | 764,501 | $13.06 | 764,501 | $100 | | February 1 - February 28, 2022 | 0 | $0 | 0 | $100 | | March 1 - March 31, 2022 | 0 | $0 | 0 | $100 | | Total | 764,501 | $13.06 | 764,501 | $100 | - The share repurchase program is authorized by the Board of Directors and is intended to offset stock-based compensation provided to the Company's directors, officers, and employees[183] Item 6. Exhibits. This section lists the exhibits filed with the 10-Q report, including various credit and security agreements, executive compensation policies, stock unit agreements, and certifications. It also specifies the iXBRL formatting for the financial statements and cover page data - Exhibits include the Credit Agreement and Syndicated Facility Agreement, Intercreditor Agreement, Pledge Agreement, Security Agreement, and various forms of Employee Performance Stock Unit and Restricted Stock Unit Agreements[186] - Financial statements and the Cover Page Interactive Data file are formatted in iXBRL (Inline eXtensible Business Reporting Language)[187][188] SIGNATURES This section contains the official signatures certifying the accuracy and completeness of the report - The report was signed on April 26, 2022, by John A. Haudrich, Senior Vice President and Chief Financial Officer of O-I Glass, Inc[192]